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%

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

jeff jeffy answered 2 years ago

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