Question

14 A benchmark index has three stocks priced at $40, $63, and $73. The number of...

14

A benchmark index has three stocks priced at $40, $63, and $73. The number of outstanding shares for each is 435,000 shares, 575,000 shares, and 723,000 shares, respectively. If the market value weighted index was 950 yesterday and the prices changed to $40, $59, and $77 today, what is the new index value?

Multiple Choice

  • 945

  • 950

  • 955

  • 940

Homework Answers

Answer #1

We will be calculating the total weight of each of the shares-

Total portfolio value at the beginning= (40 x 435000)+ (63 x 575000)+( 73* 723000)

=(174,00,000+362,25,000+52779,000)

=106404,000

Weight of stock A=(174,00,000/1064040000)=16.35%

Weight of stock B= (36225000/106404000)= 34.04%

Weight of stock C=(52779,000/106404000)= 49.60%

Return of stock A = (40-40)/40=0%

Return of stock B= (59-63)/63=-6.34%

Return of stock C= (77-73)/73= +5.479%

Total return of the index= (0*16.35%)+(-6.34*34.04%)+(5.479*49.60%)= (0+2.717-2.158)= .55864%

Value at end of the year of index= 950+(.55864% of 950)= 955

Correct answer will be option (C) 955

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
"A benchmark index has three stocks priced at $32, $35, and $70. The number of outstanding...
"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....
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?
A price-weighted index consists of stocks A, B, and C which are priced at $50, $35,...
A price-weighted index consists of stocks A, B, and C which are priced at $50, $35, and $15 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if stock A undergoes a 5-for-1 stock split? Multiple Choice A. 0.40 B. 0.65 C. 1.00 D. 1.65 1.85
1. Three stocks have share prices of $25, $50, and $30 with total market values of...
1. Three stocks have share prices of $25, $50, and $30 with total market values of $400 million, $250 million, and $150 million, respectively. If you were to construct a market value-weighted index of the three stocks, what would be the index value? ① 8,500 ② 9,000 ③ 9,250 ④ 9,500 1)-1 With the above benchmark index, today the prices of three stocks changed to $30, $45 and $35. What would be the new index value? ① 9,250 ② 9,500...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT