Question

You are given the following information concerning two stocks that make up an index. What is...

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

Homework Answers

Answer #1

Beginning value = [($83 × 46,000) + ($40 × 60,000)] / 2 = $3,109,000
Ending value = [($90 × 46,000) + ($52 × 60,000)] / 2 = $3,630,000
Return = ($3,630,000-$3,109,000) / $3,109,000 = 16.76%
Note you could also solve the problem as:
Beginning value = ($83 × 46,000) + ($40 × 60,000) = $6,218,000
Ending value = ($90 × 46,000) + ($52 × 60,000) = $7,260,000
Return = ($7,260,000 – 6,218,000) / $6,218,000 = 16.76%
The interpretation in this case is the percentage increase in the market value of the market.

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