1. You are given the following information regarding prices for a sample of stocks.PRICEStockNumber of SharesT+1A1,000,000608010,000,000203530,000,0001825Chapter 4: Security Market Indexes and Index Funds 117a. Construct a price-weighted index for these three stocks, and compute the percentagechange in the index for the period from T to T + 1.b. Construct a value-weighted index for these three stocks, and compute the percentagechange in the index for the period from T to T + 1.e. Briefly discuss the difference in the results for the twu indexes.2. a. Given the data in Problem 1, construct an equal-weighted index by assuming $1,000 isinvested in each stock. What is the percentage change in wealth for this portfolio?b. Compute the percentage of price change for each of the stocks in Problem 1. Computethe arithmetic mean of these percentage changes. Discuss how this answer compares tothe answer in part (a).c. Compute the geometric mean of the percentage changes in part (b). Discuss how thisresult compares to the answer in part (b).

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Percentages need to be entered in decimal format, for instance 3% would be entered as .03. That is the return for stock C by the way Adjust the portfolio to consist of 33.33% Stock A, 33.33% Stock B, and 33.33% Stock C (row 31). How does this change affect the portfolio average rate of return, standard deviation, and coefficient of variation versus when 50% was invested in Stock A and 50% in Stock B? Make some other changes in the percentage of stocks in the portfolio (Row 31), making sure that the percentages add up to 100%. For example, you could enter 25% for Stock A, 25% for Stock B, and 50% for Stock C. Notice that the average rate of return for the portfolio remains constant for each scenario, but the standard deviation changes. Would you prefer to hold a portfolio consisting only of Stocks A and B or a portfolio that also includes Stock C? Why or why not?
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.20RM + eA RB = -1.6% + 1.50RM + eB OM = 16%; R-squareд = 0.25; R-squarep = 0.15 What is the covariance between each stock and the market index? Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Do not round your intermediate calculations. Round your answers to nearest whole number. Stock A Stock B Covariance
Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.
Estimates of a stock's beta may vary depending on I. when the estimate was made II. the standard deviation of the stock's returns III. how many months of returns were used to estimate the beta IV. the index used to represent market returns. Group of answer choices I, II and III only I, II and IV only I, III and IV only II and IV only
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two for one in the last period. a. A market-value-weighted index. rate of returnb. An equally weighted index. rate of return
11. Consider the three stocks in the following table. P, represents price at time t, and Q, represents shares outstanding at time t. Stock C splits two for one in the last period. Po Qo P₁ Q₁ ABC 90 50 100 100 200 200 95 45 110 100 200 200 P₂ 95 45 55 Q₂ 100 200 400 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1). b. What must happen to the divisor for the price-weighted index in year 2? c. Calculate the rate of return for the second period (t = 1 tot = 2).
1
Consider the three stocks in the following table. P, represents the price at time t, and Q, represents the total shares outstanding at time t. Calculate the rate of return on a price-weighted index of three stocks for the first period (t=0 to t=1). Table 2: Data for Q4 & Q5 Q0 P1 Q1 PO 100 50 105 50 A B 200 100 210 100 C 300 100 250 100
Assume a market with five stocks: Stocks A through E. The metric which tracks the market movement is known as the MM-5 index or the MiniMarket – 5 index. Its base value is 500 based on the market capitalization and was set in December 1990. Use the information below in the image to answer the questions: i) Compute the value of MM – 5 Index on December 31, 2020ii) Compute the value of MM – 5 index on December 31, 1990iii) Compare the index values computed in the previous two parts. Has the market risen since the inception of MM – 5? Compute the percentage change between the index values in 1990 and 2020 to substantiate the answer
Consider a market value-weighted index consisting of 3 stocks: A, B, and C. The stocks' prices at time 0 (p0) and time 1 (p1) are given below, along with the number of shares outstanding. Calculate the index levels at time 0. Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321. stock p0 p1 outstanding shares 43 45 200 69 50 500 11 12 600 A B C
According to the explanation of the attached picture in my textbook is that " price-weighted index (e.g., Dow Jones) is computed by summing the prices of the individual stocks, then dividing by a divisor to determine the base index value. The divisor, such as 100, relates the starting value and is adjusted as stocks split or composition of the index is changed" please illustrate the calculation of stock market indexs and market value-weighted index correlatively with the table in picture and the explanation below the table to make me understand why divisor is 100, what's the core concept in calculating both price-weighted index and market value-weighted index in the table
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period. A B с Po 81 41 82 Rate of return 20 100 200 200 Divisor P1₁ 86 36 92 21 100 200 200 Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t= 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.) % P2 86 36 46 Q2 100 200 400 b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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