Question

In: Finance

You are given the following information. Please use it for the following 31-Dec-16 31-Dec-16 31-dec-17 31-Dec-17...

You are given the following information. Please use it for the following

31-Dec-16 31-Dec-16 31-dec-17 31-Dec-17
stock Price Shares Price Shares
w 50$ 10000 25$ 20000
x 40$ 5000 25$ 10000
y 20$ 20000 30$ 20000
z 30$ 15000 40$ 15000

Stocks W and X had 2 for 1 splits on December 31, 2016. The information in the table

for 2016 is pre-split.

3.4 Calculate the price weighted series for Dec 31, 2016, prior to the splits.

3.5 Calculate the price weighted series for Dec 31, 2016, after the splits.

3.6 Calculate the price weighted series for Dec 31, 2017.

a.

Calculate the value weighted index for Dec 31, 2016, prior to the splits. Assume a base

index value of 100. The base year is Dec 31, 2016.

b.

Calculate the value weighted index for Dec 31, 2016, after the splits. Assume a base index

value of 100. The base year is Dec 31, 2016.

3.8 Calculate the value weighted index for Dec 31, 2017. Assume a base index value of

100. The base year is Dec 31, 2016.

3.9

a.

Calculate the unweighted index for Dec 31, 2016, prior to the splits. Assume a base index

value of 100. The base year is Dec 31, 2016.

b.

Calculate the unweighted index for Dec 31, 2016, after the splits. Assume a base index

value of 100. The base year is Dec 31, 2016.

3.10 Calculate the unweighted index (geometric mean) for Dec 31, 2017. Assume a base

index value of 100. The base year is Dec 31, 2016.

Solutions

Expert Solution

3.4 Price weighted series for Dec 31, 2016 before splits = (50+40+20+30)/4 = 35

3.5 Price weighted series for Dec 31, 2016 after splits would remain the same as one with beofre the splits i.e. 35. Only the divisor is changed. The new divisor would be = (25+20+20+30)/35 = 2.71

3.6 Price weighted series for Dec 31, 2017 = (25+25+30+40)/2.71 = 44.21

3.7 a Value wieghted index before splits would be 35.16 (as calculated below)

Stocks Price (Before Split) Shares (Before Split) Market Cap Weightage Value Weigted Index
W 50 10000      5,00,000 32%                                    16.13
X 40 5000      2,00,000 13%                                     5.16
Y 20 20000      4,00,000 26%                                     5.16
Z 30 15000      4,50,000 29%                                     8.71
Total     15,50,000                                   35.16

3.7 b

Stocks Price (After Split) Shares (After Split) Market Cap Weightage Value Weigted Index
W 25 20000      5,00,000 32%                                    8.06
X 20 10000      2,00,000 13%                                     2.58
Y 20 20000      4,00,000 26%                                     5.16
Z 30 15000      4,50,000 29%                                     8.71
Total     15,50,000                                  24.52

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