Question
In: Finance
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%
Solutions
Expert Solution
The Weightage of the Three stocks is Equal
So, Weights of each stock = 1/3
Total Value of Portfolio At Time 0
= Price of Stock A * Quantity of Stock A * Weight of stock A + Price of Stock B * Quantity of Stock B * Weight of stock B + Price of Stock C * Quantity of Stock C * Weight of stock C
= 87*100*(1/3) + 47*200* (1/3) + 94*200*(1/3)
= $12,300
Now, The Total Value of Portfolio At Time 1
= Price of Stock A * Quantity of Stock A * Weight of stock A + Price of Stock B * Quantity of Stock B * Weight of stock B + Price of Stock C * Quantity of Stock C * Weight of stock C
= 92*100*(1/3) + 42*200*(1/3) + 104*200*(1/3)
= $12,800
The Rate of return
= (Total Value of Portfolio At Time 1 - Total Value of Portfolio At Time 0) / Total Value of Portfolio At Time 0
= (12800-12300) / 12300
= 500/12300
= 4.065%
Or 4.07% (rounded off to nearest digit)
Option C is the correct answer
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. 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. P(t) represents price at time t, and Q...
Consider the three stocks in the following table. P(t)
represents price at time t, and Q (t) represents share outstanding
at time t. Stock C splits two for one in the last period.
P(0)
Q(0)
P(1)
Q(1)
P(2)
Q(2)
A
90
100
95
100
95
100
B
50
200
45
200
45
200
C
100
200
110
200
55
400
First, calculate the price weighted indexes at t=0 and
t=1. Based on the two numbers calculate the rate of
return....
Consider the three stocks in the following table. Ptrepresents price at time t, and Qtrepresents shares...
Consider the three stocks in the following table.
Ptrepresents price at time t, and
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P0
Q0
P1
Q1
P2
Q2
A
90
100
95
100
100
100
B
50
200
45
200
45
200
C
100
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105
200
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