Question

# You are given the following information regarding prices for a sample of stocks. PRICE Stock Number...

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
1. 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.

%

2. Construct a value-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.

%

a).

Price weighted Index is calculated as the average of the prices.

Price weighted Index at T= (68+24+19)/3= 37

Price weighted Index at T1= (88+34+27)/3= 49.67

Percentage Change= (49.67-37)/37= 34.23%

b).

Value weighted Index is calculated as the weightage of the Prices.

Value weighted Index= (3800000*68)+(12000000*24)+(29000000*19)= 1097400000

Value weighted Index at T1= (3800000*88)+(12000000*34)+(29000000*27)= 1525400000

Percentage Change= (1525400000-1097400000)/1097400000= 39.00%

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