In: Finance

What is the return of a market capitalization weighted and evenly weighted index of two stocks with market prices of $30 and $50 that increase to $40 and $60 where the market capitalizations of each is $4 billion and $6 billion respectively at the beginning of the period?

Please show work.

No of shares will be calculated by formula = Market
capitalisation/Price per share

By calculating number of shares, ending Market capitalisation will
be calculated by = No of shares* Market price per share

Beg.Price per share Market
value No of shares

Stock A 30 4000000000
133333333.3

Stock B 50 6000000000
120000000

Total 80 10000000000

End. Price per share Market value= (no of
shares*Price per share) No of shares

Stock A 40 5333333333

Stock B 60 7200000000

Total 100 12533333333

Market weighted return is return calculated on the basis of Market
weights.

Formula =(Ending capitalisation-Opening capitalisation)/opening
capitalisation

(12533333333 -10000000000)/ 10000000000

= 0.2533333333 or 25.33%

Equally weighted index return is sum of return of all stocks of
index divided by no. of stocks

Return of individual stock formula = (End price - Beginning
price)/Beginning price

Return of A = (40-30)/30= 33.33%

Return of B = (60-50)/50= 20.00%

equally weightex return = Total of stock Return/No of
stocks

(33.33333%+20%)/2= 26.67%

So, Market weighted index Return is 25.33% and equal weighted index
return over period is 26.67%

1. We have a market capitalization weighted index of 20 stocks.
The total market capitalization of the index is $1 billion. Today,
18 of the stocks finished unchanged – that is, their return was
0.0%. The 19th stock was up 1% and has a market capitalization of
$100 million. The 20th stock was down 1% and has a market
capitalization of $10 million. What was the change in the
index?

True or False? -- The value of the market
capitalization weighted stock index consisting of the stocks shown
in the following table is less than 19.
Stock A
Stock B
Stock C
Stock D
Stock Price
$11.11
$22.22
$18.18
$29.29
Market Capitalization (in Billions)
$7
$6.5
$3.2
$8

True or False? -- The value of the market
capitalization weighted stock index consisting of the stocks shown
in the following table is less than 19.
Stock A
Stock B
Stock C
Stock D
Stock Price
$11.11
$22.22
$18.18
$29.29
Market Capitalization (in Billions)
$7
$6.5
$3.2
$8
Group of answer choices

9. Compute the average annual return and standard deviation of
an evenly weighted portfolio of stocks and 10-year government bonds
over the past five years ended December 31, 2018?

The TriValue Index is a market value weighted index comprising
of three stocks. The number of shares outstanding and the closing
stock prices for each of the stocks are given as follows:
Number of shares outstanding Closing price yesterday Closing
price today
Stock A 350,000 $23 $23
Stock B 405,000 $43 $41
Stock C 553,000 $56 $58
The number of shares outstanding for the stocks does not change
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2) An analyst gathers the following information for a market
capitalization (value) weighted index comprised of securities MNO,
QRS, and XYZ:
Stock
P0 (¥)
P1 (¥)
DPS*
Shares Outstanding
MNO
2,500
2,700
100
5,000
QRS
3,500
2,500
150
7,500
XYZ
1,500
1,600
100
10,000
*DPS= Dividends per share
(1 point) What is the price return of the
index?
(1 point) What is the total return of the
index?

An index consists of the following securities. What is the
value-weighted index return? What is the percentage value-weighted
index return? (Round your answer to 2 decimal places. Do not round
intermediate steps. Omit the "%" sign in your response.) Price per
Share Stock Shares Outstanding Beginning of Year End of Year
H 3,000 $15 $23
I 7,500 13 10
J 3,000 33 35

Expected return on two stocks for two particular market
returns:
Market
Return
Aggressive
Stock
Defensive Stock
4%
-5%
6%
20%
30%
15%
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What is the expected rate of return on each stock if the market
return is equally likely to be 4% or 20%?
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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

Assume the return on a market index represents the common factor
and all stocks in the economy have a beta of 1. Firm-specific
returns all have a standard deviation of 49%.
Suppose an analyst studies 20 stocks and finds that one-half have
an alpha of 2.6%, and one-half have an alpha of –2.6%. The analyst
then buys $1.7 million of an equally weighted portfolio of the
positive-alpha stocks and sells short $1.7 million of an equally
weighted portfolio of the...

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