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In: Finance
Question 4 (10 marks) Consider the following three stocks constitute an index. Pt represents price at...
Question 4
Consider the following three stocks constitute an index. Pt
represents price at time t and Qt represents no. of shares
outstanding at time t.
| P0 | Q0 | P1 | Q1 | |
| A | 10 | 10,000 | 12 | 10,000 |
| B | 50 | 100 | 54 | 100 |
| C | 2 | 2,000,000 | 1.85 | 2,000,000 |
a) Compute rate of return of each stock at time 1.
b) Compute percentage change of the index value at time 1 given it
is (i) value weighted index and (ii) price weighted index.
c) Assuming price weighted scheme is adopted, compute the new
divisor if Stock P, $8 per share, replaces Stock C after market
close at time 0.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents...
Consider the three stocks in the following table. Pt
represents price at time t, and Qt represents shares outstanding at
time t. Stock C splits two-for-one in the last period.
Can you show work with steps and answer c please
P
0 Q
0 P
1 Q
1 P
2 Q 2
A 80 100 85 100 90 100
B 60 200 45 200 40 200
C 110 200 120 200 60 400
c. Calculate the rate of return of the price-weighted index for
the second period (t=1 to t=2).
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table. Pt represents
price at time t, and Qt represents shares outstanding at time t.
Stock C splits two for one in the last period.
P0 Q0 P1 Q1 P2 Q2
A 90 100 95 100 95 100
B 50 200 45 200 45 200
C 100 200 110 200 55 400
a. Calculate the rate of return on a price-weighted index of the
three stocks for the first period ( t 5...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
100
100
105
100
105
100
B
60
200
55
200
55
200
C
120
200
130
200
65
400
Calculate the first-period rates of return on the following indexes
of the three stocks: (Do not round intermediate
calculations. Round your answers to...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table. Pt represents
price at time t, and Qt represents shares outstanding at time
t.
Po Q0
P1
Q1
A 87
100
92
100
B
47 200 42
200
C 94
200
104 200
What is the rate of return on the equal-weighted index of the
three stocks?
O 1.92%
O 10.64%
O. 4.07%
O 4.39%
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
80
100
85
100
85
100
B
40
200
35
200
35
200
C
80
200
90
200
45
400
Calculate the first-period rates of return on the following indexes
of the three stocks: (Do not round intermediate
calculations. Round your answers to...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
85
100
90
100
90
100
B
45
200
40
200
40
200
C
90
200
100
200
50
400
a. Calculate the rate of return on a
price-weighted index of the three stocks for the first period
(t = 0 to t...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table. Pt represents
price at time t, and Qt represents shares outstanding at time t.
Stock C splits two-for-one in the last period. P0 Q0 P1 Q1 P2 Q2 A
84 100 89 100 89 100 B 44 200 39 200 39 200 C 88 200 98 200 49 400
a. Calculate the rate of return on a price-weighted index of the
three stocks for the first period (t = 0 to t...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table. Pt
represents price at time t, and Qt represents shares
outstanding at time t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
90
100
95
100
100
100
B
50
200
45
200
35
200
C
100
200
110
200
55
400
What will the index be in day 2? (Hint: stock split happens in
the evening. Do not round intermediate calculations. Round your
answer...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
83
100
88
100
88
100
B
43
200
38
200
38
200
C
86
200
96
200
48
400
a.
Calculate the rate of...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three
stocks in the following table. Pt represents price at time t, and
Qt represents shares outstanding at time t. Stock C splits two for
one in the last period. P0 Q0 P1 Q1 P2 Q2 A 90 100 95 100 95 100 B
50 200 45 200 45 200 C 100 200 110 200 55 400
e. Calculate the first-period rates of return on a
market-value-weighted index. f. Calculate the first-period rates of
return on an equally-value-weighted...
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