Question

Assume the following information concerning two stocks that make up an index. What is the value-weighted return for the index? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

					Price per Share
	Shares Outstanding				Beginning of Year				End of Year
Kirk, Inc.		41,000			$	75			$	83
Picard Co.		35,500				116				121

Answer 1

  
   Value Weighted Return for the Index
   = (End Value - Beginning Vlaue) / Beginning Value *100
   Where,
   End Value
   = [(No of Shares outstanding of Kirk Inc* End Price) + (No of Shares outstanding of Picard Co* End Price)] / 2
   = [(41000 * $83) + (35500 * $121)] / 2
   = [$3403000 + 4295500] / 2
   = $7698500 / 2
   = $3849250
  
   Beginning Value
   = [(No of Shares outstanding of Kirk Inc* Beginning Price) + (No of Shares outstanding of Picard Co* Beginning Price)] / 2
   = [(41000 * $75) + (35500 * $116)] / 2
   = ($3075000 + $4118000) / 2
   = $71930000 / 2
   = $3596500
  
   Value Weighted Return for the Index
   = (End Value - Beginning Vlaue) / Beginning Value * 100
   = ($3849250 - $3596500) / $3596500 * 100
   = $252750 / $3596500 * 100
   = 7.03%