Question

In: Finance

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

  1. 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

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

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
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