Question

In: Finance

Consider the following information on the stock market. Company Shares Outstanding Price, beginning of year Price,...

Consider the following information on the stock market.

Company

Shares Outstanding

Price, beginning

of year

Price, end

of year

A

200

$58

$94

B

500

$20

$25

C

1000

$70

$6

  1. Compute a price-weighted stock price index for the beginning of the year and the end of the year. What is the percentage change?

  1. Compute a value-weighted stock price index for the beginning of the year and the end of the year. What is the percentage change?

Solutions

Expert Solution

a) Price Weighted Stock price Index at the beginning of the year = 58+20+70 / 3 =49.33

Price Weighted Stock price Index at the end of the year = 94+25+6 / 3 =41.67

Percentage Change = (41.67 - 49.33) / 49.33

Percentage Change = -15.54%

b) Value Weighed index at the beginning of the year = 91600

Value Weighed index at the end of the year = 37300

Percentage change = (37300-91600)/91600

Percentage change =-59.28%

Company Shares Outstanding Price beginning of year Value Weighed (Shares *Price) Price end of year

Value Weighted

(Shares *Price)

A 200 $               58.00 $ 11,600.00 $              94.00 $     18,800.00
B 500 $               20.00 $ 10,000.00 $              25.00 $     12,500.00
C 1000 $               70.00 $ 70,000.00 $                6.00 $       6,000.00
$               49.33 $ 91,600.00 $              41.67 $     37,300.00
Percentage Change -15.54% -59.28%

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