Based on the following stock price and shares outstanding information, compute the beginning and ending values for a price-weighted index and a market-value-weighted index.                                                             December 31, 2018                 December 31, 2019                                                             Price   Shares                                     Shares                                                                         Outstanding                Price    Outstanding             Stock K                                   20        100,000,000                32        100,000,000             Stock M                                  80        2,000,000                    45        4,000,000*             Stock R                                   40        25,000,000                  42        25,000,000

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
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Based on the following stock price and shares outstanding information, compute the beginning and ending values for a price-weighted index and a market-value-weighted index.
                                                            December 31, 2018                 December 31, 2019
                                                            Price   Shares                                     Shares
                                                                        Outstanding                Price    Outstanding

            Stock K                                   20        100,000,000                32        100,000,000
            Stock M                                  80        2,000,000                    45        4,000,000*
            Stock R                                   40        25,000,000                  42        25,000,000
*Stock split two-for-one during the year.
a. Compute the percentage change in the value of each index during the year.
b. Explain the difference in results between the two indexes.
c. Compute the percentage change for an un-weighted (equal weight $ 1000 is invested in each stock )index and discuss why these results differ from those of the other indexes.

 

 

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