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
Calculate the first-period rates of return on the following indexes of the three stocks: (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a. A market value–weighted indexvv
Market value weighted index return = (market value of period 1 - market value of period 0)/market value of period 0
Market value of period 0 = (Stock A P0*Q0) + (stock B P0*Q0) + (Stock C P0*Q0)
Market value of period 1 = (Stock A P1*Q1) + (stock B P1*Q1) + (Stock C P1*Q1)
Return of index period 1 = (37700-36200)/36200
=0.04143646409 or 4.14%
So market value weighted index return is 4.14%
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