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Hello students, here is a question.
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You used the following four stocks to create index m, mm, mm, and 4m.
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Their respective total number of shares outstanding will be 160, 125, 82, and 65 million.
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The beginning of a year price stock will be $45, $80, $120, and $56, $76, $117, and $132.
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We have to create the value index for this problem.
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There are four options given in the question.
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A 41 .41%, b 7 .06%, c 1 .59%, d s 3 .53%.
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These are our options.
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Let us start solving the problem.
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So our first step is calculation of weighted index return.
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Calculation of weighted index return.
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So the value of beginning of index is, so first is stock and the second column will be shares and the third column will be price in dollars and fourth column will be value at beginning.
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So here let me consider share as a and price in dollars as b.
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So to get a value at beginning, we have to multiply a into b.
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So our stocks will be m, double m, triple m, 4m.
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So our share value will be $160, $125, $82, and $65.
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The price will be $45, $80, $123, $120 which is given in the question.
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So when we multiply $160 into $45, we get $7 ,200.
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Next $125 into $80 will be $10 ,000.
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$82 into $123 will be $10 ,086.
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And $65 into $120 will be $7 ,800.
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So when we add up all this, we get $35 ,086.
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So this is our value at index at beginning.
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So next step is net net gain or loss from shares.
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Calculation of net gain or loss...