Question

An analyst gathers the following information for a market capitalization (value) weighted index comprised of securities MNO, QRS, and XYZ:

Stock	P0 (¥)	P1 (¥)	DPS*	Shares Outstanding
MNO	2,500	2,700	100	5,000
QRS	3,500	2,500	150	7,500
XYZ	1,500	1,600	100	10,000

*DPS= Dividends per share

1) What is the total return of the index?

Answer 1

Total return of Index is   -5.35%

Step-1:Calculation of investment cost of index
Stock	Shares outstanding	P0 (¥)	Investment (¥)
	a	b	c=a*b
MNO	5,000	2500	1,25,00,000
QRS	7,500	3500	2,62,50,000
XYZ	10,000	1500	1,50,00,000
Total			5,37,50,000
Step-2:Calculation of return amount of index
Stock	Shares outstanding	P0 (¥)	P1(¥)	DPS(¥)	Return Amount(¥)
	a	b	c	d	e=a*(d+(c-b))
MNO	5,000	2500	2700	100	15,00,000
QRS	7,500	3500	2500	150	-63,75,000
XYZ	10,000	1500	1600	100	20,00,000
Total					-28,75,000
Step-3:Calculation of return of the index
Return of Index	=	Return amount of index	/	Investment amount of Index
	=	- ¥28,75,000	/	¥5,37,50,000
	=	-5.35%