Question

In: Finance

1. a. You are creating an index for the four following stocks: Stock Price, t=0 Price,...

1.

a. You are creating an index for the four following stocks:

Stock

Price, t=0

Price, t=1

Shares (million)

ABC

122

107

100

DEF

46

50

500

GHI

21

26

1,200

JKL

26

30

450

What is the one day return for the index if it is price-weighted? Present your answer as the percent change from t=0 to t=1 to the nearest two decimals in this format, 1.23%

b.

Stock

Price, t=0

Price, t=1

Shares (million)

ABC

122

107

100

DEF

46

50

500

GHI

26

26

1,200

JKL

26

30

450

What is the one day return for the index if it is market capitalization-weighted? Present your answer as the percent change from t=0 to t=1 to the nearest two decimals in this format, 1.23%

c.

Stock

Price, t=0

Price, t=1

Shares (million)

ABC

120

124

100

DEF

48

50

500

GHI

24

26

1,200

JKL

26

30

450

Suppose that at the conclusion on t=1 trading day, stock ABC does a 2:1 stock split, what is the new divisor for your price-weighted index? Present your answer rounded to the nearest two digits like this, 1.23

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