With the following, what is the rate of return of period 1, if the index value is weighted?

An Index has the following stocks:

Stock	Price	Price	Shares	Shares
PQQ	20	25	20	20
HIP	50	25	10	20
LOP	15	13	25	25

Solutions

Expert Solution

Rate of ret = [ Index at ending / Index at begining ] - 1

Index = Sum [ Price * Shares ]

Index at ending :

Share	Price	Qty	Value
PQQ	$ 25.00	20	$ 500.00
HIP	$ 25.00	20	$ 500.00
LOP	$ 13.00	25	$ 325.00
Index at ending			$ 1,325.00

Index at begining:

Share	Price	Qty	Value
PQQ	$ 20.00	20	$ 400.00
HIP	$ 50.00	10	$ 500.00
LOP	$ 15.00	25	$ 375.00
Index at ending			$ 1,275.00

Rate of ret = [ Index at ending / Index at begining ] - 1

= [ 1325 / 1275 ] -1

= 1.0392 - 1

= 0.0392 I.e 3.92%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

An index consists of the following securities. What is the value-weighted index return? What is the...

An index consists of the following securities. What is the value-weighted index return? What is the percentage value-weighted index return? (Round your answer to 2 decimal places. Do not round intermediate steps. Omit the "%" sign in your response.) Price per Share Stock Shares Outstanding Beginning of Year End of Year H 3,000 $15 $23 I 7,500 13 10 J 3,000 33 35

Accounting Rate of Return Payback Period Net Present Value Internal Rate of Return Profitability Index 1)...

Accounting Rate of Return Payback Period Net Present Value Internal Rate of Return Profitability Index 1) Select three of the analytical tools and provide supportive statements explaining how each can be used to screen and/or rank future available projects. 2) Select one of the analytical tools listed and provide supportive statements explaining why you believe it provides the most important information in the decision process.

3 . Explain how we calculate the rate of return for a market-value weighted index. You...

3 . Explain how we calculate the rate of return for a market-value weighted index. You can show the formula and explain it. 4. Explain how we calculate the rate of return for an equally-weighted index. You can show the formula and explain it.

Calculate the payback period, net present value, profitability index, and internal rate of return for Project...

Calculate the payback period, net present value, profitability index, and internal rate of return for Project A. Assume a discount rate of 20%. Should the firm accept or reject Project A? Explain. If the firm must choose between Project A and Project B, which is the better choice? Explain. Under what circumstances should the modified internal rate of return be used instead of the standard internal rate of return? Project A Project B Year Cash Flow Year Cash Flow 0...

What is the return of a market capitalization weighted and evenly weighted index of two stocks...

What is the return of a market capitalization weighted and evenly weighted index of two stocks with market prices of $30 and $50 that increase to $40 and $60 where the market capitalizations of each is $4 billion and $6 billion respectively at the beginning of the period? Please show work.

Payback period, net present value, profitability index, and internal rate of return calculations) You are considering...

Payback period, net present value, profitability index, and internal rate of return calculations) You are considering a project with an initial cash outlay of $73 comma 00073,000 and expected cash flows of $21 comma 17021,170 at the end of each year for six years. The discount rate for this project is 9.99.9 percent. a. What are the project's payback and discounted payback periods? b. What is the project's NPV? c. What is the project's PI? d. What is the project's...

Question Calculate Pay Back Period, Net Present Value, Internal Rate of Return and Profitability Index (Benefit...

Question Calculate Pay Back Period, Net Present Value, Internal Rate of Return and Profitability Index (Benefit Cost Ration) of each of these projects and decide and provide your analysis which project is better. Critically evaluate your decision. On January 11, 2005, the finance committee of Harding Plastic Molding Company (HPMC) met to consider eight capital budgeting projects. Present at the meeting were Robert L. Harding, President and founder, Susan Jorgensen, comptroller, and Chris Woelk, head of research & development. Over...

PA11-1 Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return...

PA11-1 Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4] Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: Initial investment (for two hot air balloons) $ 402,000 Useful life 9 years Salvage value $ 51,000 Annual net income generated 34,572 BBS’s cost of capital 8 % Assume...

PA11-1 Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return...

PA11-1 Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4] Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: Initial investment (for two hot air balloons) $ 332,000 Useful life 6 years Salvage value $ 50,000 Annual net income generated 30,876 BBS’s cost of capital 10 % Assume...

PA11-1 Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return...

PA11-1 Calculating Accounting Rate of Return, Payback Period, Net Present Value, Estimating Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4] Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: Initial investment (for two hot air balloons) $ 402,000 Useful life 9 years Salvage value $ 42,000 Annual net income generated 35,778 BBS’s cost of capital 10 % Assume...

Subjects