1. An index consists of the following securities. What is the price-weighted ind

Question

1. An index consists of the following securities. What is the price-weighted index $ return?

       What is the price-weighted index % return?

                                                    Shares                     Beginning                      Ending

                           Stock                        Outstanding                Share Price                 Share Price

                        Cleaner Maids                2,000                                        $47                              $50

                        Krystal Woods               5,000                                        $16                              $15

                        Sage’s Widgets               3,000                                        $25                              $28

  2.     An index has a market value of $479.997 at the beginning of the period and $500,013 at the end of the period. If you want the beginning index value to be 10,000, what is the ending index value?

ANSWER BOTH OR I WILL GIVE A THUMBS DOWN

Thanks

Explanation / Answer

1. Price weighted index % return = (50+15+28)/(47+16+25) - 1 = 5.68%

2. The ending index value = 10,000 * 500,013/479,997 = 10,417.0026

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