Question

Given the following information concerning three stocks, construct a price-weighted average, a value-weighted average, and a geometric average. SHOW 2 DECIMAL PLACES.  YOU MUST SHOW ALL WORK TO RECEIVE CREDIT.

       Stock Price Shares Outstanding
A          $10.00 1,000,000
B          $14.00 3,000,000
C          $21.00 10,000,000

Answer 1

Solution:

1. Price - weighted average = price of share / No . of observations

Price - weighted average = ($10+ $14 + $21)/3

Price - weighted average = $45/3

Price - weighted average = $15.

2. Value Weighted Average = price per share Number of shares / Total number of shares

Value Weighted Average =

= ($10 1,000,000) + ($14 3,000,000) + ($21 10,000,000) / (1,000,000 + 3,000,000 + 10,000,000)

= ($10,000,000 + $42,000,000 + $210,000,000) / 14,000,000

= $ 262,000,000 / 14,000,000

Value Weighted Average = $18.71

3. Geomatric Average =

Geomatric Average =

Geomatric Average =

Geomatric Average =

Geomatric Average = $14.33