Question

Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period. P0 Q0 P1 Q1 P2 Q2 A 100 100 105 100 105 100 B 60 200 55 200 55 200 C 120 200 130 200 65 400 Calculate the first-period rates of return on the following indexes of the three stocks: (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. A market value–weighted index Rate of return % b. An equally weighted index Rate of return %

Answer #1

(a) A market-value-weighted index

Market value = stock price * number of Shares outstanding

Market value of Stocks at t=0

A market value = 100 * 100 = 10000

B market value = 60 * 200 = 12000

C market value = 120 * 200 = 24000

Market value of Stocks at t= 1

A market value = 105 * 100 = 10500

B market value = 55 * 200 = 11000

C market value = 130 * 200 = 26000

Market value of Stocks at t= 2

A market value = 105 * 100 = 10500

B market value = 55 * 200 = 11000

C market value = 65 * 400 = 26000

Total market value at t = 0 is: (10000 +12000 +24000 ) = 46000

Total market value at t = 1 is: (10500 + 11000 + 26000) = 47500

Rate of return = (47500/46000) - 1 = 3.26%

(b) The return on each stock is as follows:

Ra = (105/100) - 1 = 0.05

Rb = (55/60) - 1 = -0.0833

Rc = (130/120) - 1 = 0.0833

The equally-weighted average is: [0.05 + (-0.0833) + 0.0833]/3 = 0.0167

= 1.67%

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
90
100
95
100
95
100
B
50
200
45
200
45
200
C
100
200
110
200
55
400
Calculate the first-period rates of return on the following
indexes of the three stocks: (Do not round intermediate
calculations. Round answers to 2...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
90
100
95
100
95
100
B
50
200
45
200
45
200
C
100
200
110
200
55
400
Calculate the first-period rates of return on the following
indexes of the three stocks: (Do not round intermediate
calculations. Round answers to 2...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
95
100
100
100
100
100
B
55
200
50
200
50
200
C
110
200
120
200
60
400
Calculate the first-period rates of...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
88
100
93
100
93
100
B
48
200
43
200
43
200
C
96
200
106
200
53
400
Calculate the first-period rates of return on the following indexes
of the three stocks: (Do not round intermediate
calculations. Round your answers to...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
87
100
92
100
92
100
B
47
200
42
200
42
200
C
94
200
104
200
52
400
Calculate the first-period rates of return on the following indexes
of the three stocks: (Do not round intermediate
calculations. Round your answers to...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
96
100
101
100
101
100
B
56
200
51
200
51
200
C
112
200
122
200
61
400
Calculate the first-period rates of return on the following indexes
of the three stocks: (Do not round intermediate
calculations. Round your answers to...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
88
100
93
100
93
100
B
48
200
43
200
43
200
C
96
200
106
200
53
400
Calculate the first-period rates of...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two for one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
130
135
135
135
135
135
B
125
270
120
270
120
270
C
250
270
260
270
135
540
Calculate the first-period rates of return on the following indexes
of the three stocks (t = 0 to t = 1):...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two for one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
55
65
65
65
65
65
B
45
120
35
120
35
120
C
90
120
95
120
50
240
Calculate the first-period rates of return on the following
indexes of the three stocks (t = 0 to t = 1):...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
97
100
102
100
102
100
B
57
200
52
200
52
200
C
114
200
124
200
62
400
a. Calculate the rate of return on a
price-weighted index of the three stocks for the first period
(t = 0 to t...

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