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 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
1
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
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.)
b) Suppose that you observe the following information in Table 2 for stocks A and B: Table 2 Expected Return (%) 11% Stock Beta A 0.8 В 14% 1.5 The risk-free rate of return is 6% and the expected rate of return on the market index is 12%. Using the Single-Index Model, calculate the alpha of both stocks. Show your calculations. Explain what the alpha of the single-factor model represents and interpret your results.
pm.3
can you do the question b please
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 C Po 82 42 84 Rate of return 00 100 Divisor 200 200 P1 87 37 94 01 100 200 200 % P2 87 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.) 370 47 92 100 200 400 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.) c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t=2).
Vinay
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. ABC Po 86 46 92 le 100 200 200 Rate of return P1 91 41 102 Q1 100 1.89 % 200 200 P2 91 41 51 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.) 22 100 200 400

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