Question

The four stocks below are part of an index. Use the information below: a. Compute a price-weighted index by adding their prices at time t and time t 1 1. What is the percentage change in the index? b. Compute a value-weighted index by adding their market values at time t and time t 1 1. What is the percentage change in the index? c. Why is there a difference between your answers to (a) and (b)? # OF SHARES PRICE AT PRICE AT STOCK OUTSTANDING TIME (t ) TIME ( t 1 1) Eeny 100 10 15 Meeny 50 20 22 Miney 50 30 28 Moe 20 40 42

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**Answer:**

1. Price weight index at time t = (10+20+30+40)/4 =25 At t+1 = (15+22+28+42)/4 =107/4 =26.9 Percentage change in index = (26.9-25)/25 =7.6%

2. At time t= ((100×10)+(50×20)+(50×30)+(20×40))/(100+50+50+20) =4300/120 =35.84 At t+1 time =((100×15)+(50×22)+(50×28)+(20×42))/(100+50+50+20)) =40.33 % change = (40.85-35.84)/35.84 =12.53%

3 Difference is because of in value weighted index we are taking market capitalization of the stocks movement and in price weighted index we are taking only price movement.

You are given the following information regarding prices for a
sample of stocks.
PRICE
Stock
Number of Shares
T
T + 1
A
3,800,000
$68
$88
B
12,000,000
24
34
C
29,000,000
19
27
Construct a price-weighted index for these three
stocks, and compute the percentage change in the index for the
period from T to T + 1. Do not round intermediate
calculations. Round your answer to two decimal places.
%
Construct a value-weighted index for these three
stocks,...

An index consists of 3 stocks: A, B and C. At date 0, the prices
per share for A, B and C are $13, $60, and $15, respectively. At
date 0, the number of shares outstanding for A, B, and C are 100,
120, and 3000 respectively. At date 1, the prices per share for A,
B and C are $12, $22, and $12, respectively. At date 1, the number
of shares outstanding for A, B, and C are 100,...

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...

You are given the following information concerning two stocks
that make up an index. What is the percentage
value-weighted return for the index?
Shares Outstanding
Beginning of Year Price
End of year Price
Kirk, Inc.
46,000
$83
$90
Picard Co.
60,000
40
52

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. P(t)
represents price at time t, and Q(t) represents shares outstanding
at time t. Stock C splits two-for-one in the last period.
a.) What is the new divisor for the price-weighted index that is
formed using Stocks A, B, and C if the starting divisor is 3?
b.)What is the rate of return for the price-weighted index that
is formed using Stocks A, B, and C from time period 1 to time...

Below is a list of 3 stocks. Calculate the return based on
price-weighted index, value-weighted index, and equal-weighted
index. (Assume you invested yesterday).
Stock
Price yesterday
Price today
Market Cap (billions)
JPM
$116
$115
362
WFC
$49
$48
214
BAC
$28
$29
259

"A benchmark index has three stocks priced at $32, $35, and $70.
The number of outstanding shares for each is 350000 shares, 405000
shares, and 553000 shares, respectively. Suppose the price of these
three stocks changed to $30, $40, and $62 and number of outstanding
shares did not change, what is the equal-weighted index
return?"
-3.65%
0.72%
-1.13%
-4.45%
question 18

Suppose that a stock index is constructed with three stocks
priced at $7, $43, and $56. The number of outstanding shares for
each is 500,000 shares, 405,000 shares, and 553,000 shares,
respectively. Today the prices for each stock are changed to $14,
$44, and $52 and the number of outstanding shares for each are
changed to 250,000 shares, 405,000 shares and 553,000 shares today,
what is the price weighted index value today if the index yesterday
was 10,500?

Number of shares
Closing Prices
Company
outstanding
Year T
Year T + 1
W
1,500
$22.00
$18.00
X
2,500
35.00
25.00
Y
2,000
10.00
15.00
Z
3,000
50.00
48.00
Find the percentage change of a value-weighted index consisting
of these four stocks from years T to T+1. Round your final answer
to four decimals and enter your answer in decimal format (EX:
.XXXX)
Which of the following is a flaw of price-weighted indices?
They cannot be adjusted for stock splits...

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