Assume that there are two stocks, DELL and P&G, in an Index. The price of DELL...

Assume that there are two stocks, DELL and P&G, in an Index.

The price of DELL is currently $100 per share, there are 50 shares of DELL stock outstanding, and the return on DELL stock over the next year will be 25%.

The price of P&G is currently $50 per share, there are 100 shares of P&G stock outstanding, and the return on P&G stock over the next year will be 10%.

19) What is the return over the year on a MARKET VALUE-WEIGHTED INDEX?

A. 17.5%

B. 20%

C. 25%

D. 10%

E. NONE OF THE ABOVE (Put the correct answer next to the letter E on the answer sheet.)

20) Which stock, if any, carries more weight when calculating the rate of return using the MARKET VALUE-WEIGHTED INDEX method?

A. DELL

B. P&G

C. THEY CARRY THE SAME WEIGHT

Expert Solution

jeff jeffy answered 2 years ago

Assume that you construct a price weighted index of 30 stocks. The sum of the prices...

Assume that you construct a price weighted index of 30 stocks. The sum of the prices of these stocks is $2000. The divisor for this index is 30, and the value of this index is 100. Now assume that one of the 30 stocks, with an average price of $100, has a three-for-one stock split while the value of other stocks remains unchanged. a) If you make no adjustments to the index, what will be the new value of the...

You are given the following information concerning two stocks that make up an index. Assume the...

You are given the following information concerning two stocks that make up an index. Assume the value-weighted index level was 280.98 at the beginning of the year. What is the index level at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price per Share Shares Outstanding Beginning of Year End of Year Kirk, Inc. 40,000 $ 64 $ 70 Picard Co. 35,500 114 122 Index level

1) Assume the following information concerning two stocks that make up an index. What is the...

1) Assume the following information concerning two stocks that make up an index. What is the value-weighted return for the index? Price per Share Shares Outstanding Beginning of Year End of Year Kirk, Inc. 37,000 $ 53 $ 57 Picard Co. 27,000 79 84 Round intermediate steps and your final answer to four decimals. Enter your answer in decimal format ( EX: XXXX). 2) You want to sell 600 shares of DEF stock at the going market price after the...

1. Assume the following information concerning two stocks that make up an index. What is the...

1. 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. 42,000 $ 54 $ 61 Picard Co. 29,500 79 85 RETURN %: 2. You are given the following information concerning two stocks that make up an index. Assume that you...

There are two stocks, A and B, which make up a particular price-weighted index. Below are...

There are two stocks, A and B, which make up a particular price-weighted index. Below are the closing prices and number of shares outstanding for each stock for yesterday and today. Stock B split 3-for-1 today before the market opened. What is the value of the index after the close today if the index contains stocks A and B and closed yesterday at 115.00 (before stock B split 3-for-1)? Yesterday Today Closing price of stock A $150 $162...

You construct a price-weighted index of 55 stocks. At the beginning of the day, the index...

You construct a price-weighted index of 55 stocks. At the beginning of the day, the index is 8,710.44. During the day, 54 stock prices remain the same, and 1 stock price increases $5.40. At the end of the day, your index value is 8,757.89. What is the divisor on your index?

Assume the following information concerning two stocks that make up an index. What is the value-weighted...

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

Suppose that: S&P 500 index is trading at 2000; index stocks do not pay any dividends;...

Suppose that: S&P 500 index is trading at 2000; index stocks do not pay any dividends; and you can borrow and lend at 5% per annum. You have an index portfolio worth $20 million. An index futures contract with a multiplier of 100 matures in a year – this means one futures contract represents an index basket of stocks with a market value of 100 times the index value. How will you fully hedge your portfolio for a one year...

A price weighted index is composed of two stocks. After experiencing a 3:1 split, stock one...

A price weighted index is composed of two stocks. After experiencing a 3:1 split, stock one is priced at $22.25. Stock two is priced at $208.25. The original divisor of the index is 2.0. Compute the new divisor.

A price-weighted index is comprised of three stocks. Yesterday the three stocks were priced at $15,...

A price-weighted index is comprised of three stocks. Yesterday the three stocks were priced at $15, $20, and $32. The number of outstanding shares for each is 500 shares, 2,000 shares, and 1,000 shares, respectively. If the stock prices changed to $16, $15, and $38 today respectively, what is the 1-day rate of return on the index? ① 2.7% ② 3.0% ③ 3.3% ④ 3.6%

Question