Question

Problems 1. You are given the following information regarding prices for stocks of the following firms: PRICE Stock Number of Shares T T+1 Lauren Corp. 1,000,000 60 80 Kayleigh Co. 10,000,000 20 35 Madison Ltd. 30,000,000 18 25 a. Construct a price-weighted index for these three stocks, and compute the percentage change in the series for the period from T to T + 1. b. Construct a market-value-weighted index for these three stocks, and compute the percentage change in the series for the period from T to T + 1. c. Briefly discuss the difference in the results for the two stock indexes. 2. a. Given the data in Problem 1, construct an equal-weighted index by assuming $1,000 is invested in each stock. What is the percentage change in wealth for this equal-weighted portfolio? b. Compute the percentage of price change for each of the stocks in Problem 1. Compute the arith- metic average of these percentage changes. Discuss how this answer compares to the answer in 2a. c. Compute the geometric average of the three percentage changes in 2b. Discuss how this result compares to the answer in 2b. of figures in The Wall Street Journal, compute the daily

          Problems
1. You are given the following information regarding prices for stocks of the following firms:
PRICE
Stock
Number of Shares
T
T+1
Lauren Corp.
1,000,000
60
80
Kayleigh Co.
10,000,000
20
35
Madison Ltd.
30,000,000
18
25
a. Construct a price-weighted index for these three stocks, and compute the percentage change in the
series for the period from T to T + 1.
b. Construct a market-value-weighted index for these three stocks, and compute the percentage
change in the series for the period from T to T + 1.
c. Briefly discuss the difference in the results for the two stock indexes.
2. a. Given the data in Problem 1, construct an equal-weighted index by assuming $1,000 is invested in
each stock. What is the percentage change in wealth for this equal-weighted portfolio?
b. Compute the percentage of price change for each of the stocks in Problem 1. Compute the arith-
metic average of these percentage changes. Discuss how this answer compares to the answer in 2a.
c. Compute the geometric average of the three percentage changes in 2b. Discuss how this result
compares to the answer in 2b.
of figures in The Wall Street Journal, compute the daily

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Problems
1. You are given the following information regarding prices for stocks of the following firms:
PRICE
Stock
Number of Shares
T
T+1
Lauren Corp.
1,000,000
60
80
Kayleigh Co.
10,000,000
20
35
Madison Ltd.
30,000,000
18
25
a. Construct a price-weighted index for these three stocks, and compute the percentage change in the
series for the period from T to T + 1.
b. Construct a market-value-weighted index for these three stocks, and compute the percentage
change in the series for the period from T to T + 1.
c. Briefly discuss the difference in the results for the two stock indexes.
2. a. Given the data in Problem 1, construct an equal-weighted index by assuming 1,000 is invested in
each stock. What is the percentage change in wealth for this equal-weighted portfolio?
b. Compute the percentage of price change for each of the stocks in Problem 1. Compute the arith-
metic average of these percentage changes. Discuss how this answer compares to the answer in 2a.
c. Compute the geometric average of the three percentage changes in 2b. Discuss how this result
compares to the answer in 2b.
of figures in The Wall Street Journal, compute the daily

Added by Angelica A.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Akash M

08/03/2023

Step 1

at T: $1,000,000 * 60 = $60,000,000 Lauren Corp. at T+1: $1,000,000 * 80 = $80,000,000 Kayleigh Co. at T: $10,000,000 * 20 = $200,000,000 Kayleigh Co. at T+1: $10,000,000 * 35 = $350,000,000 Madison Ltd. at T: $30,000,000 * 18 = $540,000,000 Madison Ltd. at T+1: Show more…

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Problems: 1. You are given the following information regarding prices for stocks of the following firms: [ egin{array}{|c|c|c|c|c|} hline ext{PRICE} & ext{Stock} & ext{Number of Shares} & T & T+1 \ hline ext{Lauren Corp.} & 1,000,000 & 60 & 80 \ ext{Kayleigh Co.} & 10,000,000 & 20 & 35 \ ext{Madison Ltd.} & 30,000,000 & 18 & 25 \ hline end{array} ] a. Construct a price-weighted index for these three stocks, and compute the percentage change in the series for the period from T to T+1. Compare the answer in 2b. The Wall Street Journal, compute the daily

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Transcript

00:01 We will firstly evaluate the price weighted index.

00:07 So, it is evaluated as total market value at t wherein we add 1 which is then divided by total market value at t which is then multiplied by 100.

00:43 So, firstly evaluating total market value at t.

00:54 So, it is evaluated as price of stock a at t which is 60 wherein we multiply it by number of shares of stock a.

01:06 It is 10 lakh wherein we add price of stock b at t which is 20, sorry 20 wherein we multiply it by 1 crore which is said to be the number of shares of stock b wherein we add price, sorry price of stock c at t which is 18 wherein we multiply it by 3 crore which is the number of shares of stock c.

01:50 So, equating it we get 6 crores which we add 3 crores wherein we add 54 crores.

02:17 So, equating it we get the value to be 80 crores.

02:28 Next evaluating total market value at t plus 1, sorry t wherein we add 1 which is evaluated as price of stock a at t plus 1 wherein we multiply it by number of stock shares of stock a.

02:51 So, putting in the values 80 multiplied by 10 lakh wherein we add 35 which is the price of stock b at t plus 1 which is then multiplied by 1 crore wherein we add price of stock c at t plus 1 which is 25 wherein it which is multiplied by number of shares of stock c.

03:25 So, it is 3 crores.

03:32 Evaluating it we get the value to be 8 crores to which we add 35 crores wherein we add 75 crores.

03:51 So, equating it we get the value to be 118 crores.

04:13 Then price weighted index is 118 crores divided by 8 crores, it's 80 crores not 8 which is then multiplied by 100.

04:45 We get the value to be approximately 147 .50%...

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