Question

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A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $18, $26, and $60.

A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $18, $26, and $60. The number of outstanding shares for each is 650,000 shares, 550,000 shares, and 250,000 shares, respectively. If the stock prices changed to $22, $24, and $62 today respectively, what is the 1-day rate of return on the index?

  • 5.77%

  • 7.77%

  • 4.88%

  • 3.66%

Solutions

Expert Solution

 

- Calculating the Total Value of Index on each individual day:-

Yesterday Price(P0) Today price(P1) No of shares No of shares*P0 No of shares*P1
18 22                     650,000           11,700,000.00          14,300,000.00
26 24                     550,000           14,300,000.00          13,200,000.00
60 62                     250,000           15,000,000.00          15,500,000.00
                41,000,000.00          43,000,000.00

Total value of Index Yesrterday = $41,000,000

Total value of Index Today = $43,000,000

One-Day Return on Index = (Total value of Index Today - Total value of Index Yesrterday)/Total value of Index Yesrterday

= ($43,000,000 - $41,000,000)/$41,000,000

One-Day Return on Index = 4.88%

Option 3

 

 


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