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In: Finance

Consider the following information on the stock market. Company Shares Outstanding Price, beginning of year Price,...

Consider the following information on the stock market.

Company

Shares Outstanding

Price, beginning

of year

Price, end

of year

A

200

$58

$94

B

500

$20

$25

C

1000

$70

$6
  1. Compute a price-weighted stock price index for the beginning of the year and the end of the year. What is the percentage change?
  2. Compute a value-weighted stock price index for the beginning of the year and the end of the year. What is the percentage change?

Solutions

Expert Solution

Changed in index are in %

Summary :

1.price weighted stock price is calculated simply by summing up all the stock price and by dividing the total by number of stock participants. Here number of stock participants are 3.

2. Value weighted stock price index is calculated by multiplying stock price to stock outstanding and then value weight is calculated. Stock prices are multiplied with value weight to arrive at weighted price and then by summing up all and dividing it with number of stock participants.

jeff jeffy answered 2 years ago
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