The following three defense stocks are to be combined into a stock index in January 2022 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Assume the index is scaled by a factor of 10 million; that is, if the total value of all firms in the market is $5 billion, the index would be quoted as 500. Douglas McDonnell Dynamics General International Rockwell Index value Shares (millions) 215 455 250 2022 return 2023 return 1/1/22 $64 72 101 Price 1/1/23 a. Calculate the initial value of the index if a value-weighting scheme is used. Note: Round your answer to 2 decimal places. $68 64 90 1/1/24 $82 78 106 b. What is the rate of return on this index for the year ending December 3 2022? For the year ending December 31, 2023? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.

The following three defense stocks are to be combined into a stock index in January 2022 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Assume the index is scaled by a factor of 10 million; that is, if the total value of all firms in the market is $5 billion, the index would be quoted as 500. Douglas McDonnell Dynamics General International Rockwell Index value Shares (millions) 215 455 250 2022 return 2023 return 1/1/22 $64 72 101 Price 1/1/23 a. Calculate the initial value of the index if a value-weighting scheme is used. Note: Round your answer to 2 decimal places. $68 64 90 1/1/24 $82 78 106 b. What is the rate of return on this index for the year ending December 3 2022? For the year ending December 31, 2023? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.

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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The value of the shares in the S&P 500 index is $12,270B. Apple Inc. is the largest company in the index-it is worth $552.158. If you want to build a portfolio that earns the same return as the S&P 500, what is the portfolio weight on Apple? O 4.5% O 3.5% O 5.5% O 6.5%
H2. A benchmark index has three stocks priced at $60, $65, and $70. The number of outstanding shares for each is 444,000 shares, 555,000 shares, and 777,000 shares, respectively. Suppose the price of these three stocks changed to $40, $70, and $90, respectively and number of outstanding shares did not change, what is the equal-weighted index return?
Demonstrate the impact of different values on a market value weighted stock index with a hypothetical example considering three stocks (stock A, B and C), no. of shares and price for base year 2020 and for the year 2021 with two different cases Case A and Case B ( base year index value as 100)
In the beginning of January 2023 you want to estimate the value of a stock. On December 31 2022 the price of the stock was $63.5 and you believe that the annual dividend growth rate and stock price growth rate will be 7% for the years 2023, 2024 and 2025. The dividend of 2022 will be paid in 2023 and will be S 1.48. The discount rate is 11.5%. Calculate the price of the stock and say if it is over or undervalued
Ralph is constructing a price-weighted index. On March 1, 2XX1, he has the following stocks in the index: Company Share price # shares outstanding Walmart $42.6 26,000 Kmart $18.76 19,000 Venture $55.11 63,000 Macy’s $39.61 45,000 What is the price-weighted index on March 1, 2XX1? (Do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.167))
The following three defense stocks are to be combined into a stock index in January 2019 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Suppose that Douglas McDonnell shareholders approve a 2-for-1 stock split on January 1, 2020. Douglas McDonnell Dynamics General International Rockwell New divisor Shares (millions) 180 325 370 Rate of return 1/1/19 $ 60 68 97 Price 1/1/20 $ 64 64 86 a. What is the new divisor for the index? (Do not round intermediate calculations. Round your answer to 3 decimal places.) 1/1/21 $77 78 100 b. Calculate the rate of return on the index for the year ending December 31, 2020, if Douglas McDonnell's share price on January 1, 2021, is $23.42 per share. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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Assume your portfolio consists of 50% of a stock with a beta of 1.703 and 50% of a stock with a beta of 0.918. For each 1 dollar of your portfolio, how much SP500 index should you short? (enter number only)
Consider 2 stocks in the following table. We create a stock index of companies that make stuff for Spring Break. stocks PO Q0 P1 Q1 ABC, Inc. $ 370p0 1200q0 $400p1 1200q1 XYZ, Inc. $650p0 250q0 $620p 1 250q1 What is the return on a equal - weighted index of these two stocks in percent to 2 decimal places
Consider the following table of annual rates of return, in percentage, for four common risky assets over the time period 2010 to 2019 • Berkshire Hathaway (ticker: BRK/A) • S&P 500 Index (ticker: SPX) • NASDAQ 100 Index (ticker: NDX) • Russell 2000 Index (ticker: RUT) YEAR BRK/A SPX NDX RUT 2010 21.4 15.1 19.22 26.85 2011 -4.7 2.1 2.7 -4.18 2012 16.8 16 16.82 16.35 2013 32.7 32.4 34.99 38.82 2014 27 13.7 17.94 4.89 2015 -12.5 1.4 8.43 -4.41 2016 23.4 12 5.89 21.31 2017 21.9 21.8 31.52 14.65 2018 2.8 -4.4 -1.04 -11.01 2019 11 31.5 37.96 25.52 Now assume there is a risk-free asset available and the annual risk-free rate is 2%. Using mean-variance portfolio theory, determine the 4 portfolio weightings and the portfolio variance for the unique fund F defined by the tangent portfolio and the one-fund theorem. Note that the portfolio weights sum to 1 and short selling (negative weights) are permissible.
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Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, So. Is $100, and a call option expiring in one year has an exercise price, X, of $100 and is selling at a price, Co. 01 S10. With $10,000 to invest, you are considering three alternatives. Invest all $10,000 in the stock, buying 100 shares. Invest all $10,000 in 1,000 options (10 contracts). Buy 100 options (one contract) for $1,000, and invest the remaining $9,000 in a money market fund paying 4% annual interest. What is your rate of retum for each alternative for the following four stock prices in one year?

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