You have accumulated data on three stocks (see below). You have decided to use t
ID: 2669564 • Letter: Y
Question
You have accumulated data on three stocks (see below). You have decided to use the information on these stocks to form an index. You want to find the average earned rate of return for 2011 on your index. If you follow the averaging procedure used to calculate the S&P 500 Index return, what would your index's rate of return be? Hints: Rates of return are based on beginning-of-year prices, and the S&P Index is weighted by market values of the companies in the index.Stock Dividend Beginning Price Ending Price Shares Outstanding (millions)
A $1.50 $30.00 $32.00 5.00
B $2.00 $28.50 $27.00 4.50
C $0.75 $20.00 $24.00 20.00
Explanation / Answer
Stock
dividend
Price at beginning
ending
chnage
Share -outstanding
Toal=market value
Weight(%)
A
1.50
30.00
32.00
2.00
5.00
150.00
22.12
B
2.00
28.50
27.00
-1.50
4.50
128.25
18.91
C
0.75
20.00
24.00
4.00
20.00
400.00
58.98
678.25
Stock
Dividend
yield
Gain yiels
Etoal returen
weight
Weight
return
A
5%
6.67%
11.67%
0.2212%
0.0258
B
7.02%
-5.26%
1.75%
1.75%
0.0033
C
3.75%
20.00%
23.75%
23.75%
0.01401
0.1692
Answer Index return: 16.92%
Stock
dividend
Price at beginning
ending
chnage
Share -outstanding
Toal=market value
Weight(%)
A
1.50
30.00
32.00
2.00
5.00
150.00
22.12
B
2.00
28.50
27.00
-1.50
4.50
128.25
18.91
C
0.75
20.00
24.00
4.00
20.00
400.00
58.98
678.25
Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.