Question
In: Finance
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 |
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%
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