A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3 stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and $86, respectively. What is the return on the price-weighted index over the year?
A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3 stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and $86, respectively. What is the return on the price-weighted index over the year?
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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![A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3
stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and
$86, respectively. What is the return on the price-weighted index over the year?
Select one:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3d2564ab-ee06-4e56-ad5b-3f453984466b%2F4d7ec8fa-609b-49fd-abe9-afaf0519ee44%2F0v4x0wl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3
stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and
$86, respectively. What is the return on the price-weighted index over the year?
Select one:
![Consider the following data concerning the expected return and standard deviation of a stock A
and a stock B with a correlation of 0.5.
Expected
Return Standard
Deviation
Stock A
16%
20%
Stock B
10%
15%
A new portfolio is formed with 25% invested in A and 75% invested in B. Determine the expected
return of the new portfolio.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3d2564ab-ee06-4e56-ad5b-3f453984466b%2F4d7ec8fa-609b-49fd-abe9-afaf0519ee44%2Ftae2rsg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the following data concerning the expected return and standard deviation of a stock A
and a stock B with a correlation of 0.5.
Expected
Return Standard
Deviation
Stock A
16%
20%
Stock B
10%
15%
A new portfolio is formed with 25% invested in A and 75% invested in B. Determine the expected
return of the new portfolio.
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Step 1 Note
VIEWStep 2 Introduction of price weighted index
VIEWStep 3 Total value of all stocks at starting of the year
VIEWStep 4 Calculation of Beginning Index value
VIEWStep 5 Calculation of Total value of all stocks at the end of the year
VIEWStep 6 Calculation of Ending Index value
VIEWStep 7 Calculation of Numerical loss or gain on investment
VIEWStep 8 Calculation of Rate of return of the index
VIEWStep 9 Final answer
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