Question

The Hydro Index is a price weighted stock index based on the 4 largest boat manufacturers...

The Hydro Index is a price weighted stock index based on the 4 largest boat manufacturers in the nation. Consider the four stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. (Please pay close attention to stock split)

P0

Q0

P1

Q1

P2

Q2

A

80

200

90

200

98

200

B

50

300

40

300

50

300

C

90

200

110

200

115

200

D

100

100

90

100

40

300

a.      What must be the divisor for the price- weighted index in year 2?  (Keep your answer to four decimals, such as 2.3456)
b.     What is the price weighted index at t=1 ?  (Keep your answer to only two decimals, such as 81.23)
c.      What is the price weighted index at t=2?  (Keep your answer to only two decimals, such as 81.23)

Homework Answers

Answer #2

For price weighte index, divisor changes with stock splits. But, initially the divisor is just the no. of stocks in the index.

So, initial divisor = 3

In year 2, clearly there was a 3 for 1 stock split in Stock D

Now if the stock split has not happened, stock price of D would have been = 40*3 = 120

so, if the stock split has not happened, price weighted average woud have been = (98+50+115+120)/4 = 95.75

so, divisor for the price weighted indec in year 2 = sum of stock prices in year 2 / price weighted average if the stock split had not happened = (98+50+115+40)/95.75 = 3.1645

b. price weighted index at t=1, = (90+40+110+90)/4 = 82.5

c. price weighted index at t=1, = (98+50+115+40)/3.1645 = 95.75

answered by: anonymous
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
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 86 100 91 100 91 100 B 46 200 41 200 41 200 C 92 200 102 200 51 400 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
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 99       100       104       100       104       100         B 59       200       54       200       54       200         C 118       200       128       200       64       400       a. Calculate the rate of...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
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...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
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 93 100 98 100 98 100 B 53 200 48 200 48 200 C 106 200 116 200 58 400 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t...
onsider the three stocks in the following table. Pt represents price at time t, and Qt...
onsider 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 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
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...
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...
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...
(Pt represents price at time t, and Qt represents shares outstanding at time t. ) Stock...
(Pt represents price at time t, and Qt represents shares outstanding at time t. ) Stock C splits 3 for 1 in year 2018 and Stock D splits 2 for 1 in year 2019 Name P17 Q17 P18 Q18 P19 Q19 W 170 100 175 100 172 100 X 95 200 98 200 97 200 Y 180 200 57 600 60 600 Z 100 200 110 200 55 400 A. What is the new divisor for the price-weighted index in...
P0 Q0 P1 Q1 A $130 100 140 100 B 60 200 50 200 C 200...
P0 Q0 P1 Q1 A $130 100 140 100 B 60 200 50 200 C 200 400 214 400 Using Price Weighted Index, if stock C has a two-for-one stock split at t =1, what should be the new divisor at end of period t = 1? 1) Index value before stock split 2) Index value after stock split 3) New divisor
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT