A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and$86, respectively. What is the return on the price-weighted index over the year?Select one: Consider the following data concerning the expected return and standard deviation of a stock Aand a stock B with a correlation of 0.5.ExpectedReturn StandardDeviationStock A16%20%Stock B10%15%A new portfolio is formed with 25% invested in A and 75% invested in B. Determine the expectedreturn of the new portfolio.

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A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3 stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and $86, respectively. What is the return on the price-weighted index over the year?

A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3 stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and $86, respectively. What is the return on the price-weighted index over the year?

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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Question

A price-weighted index comprises of 3 stocks A, B, and C. The beginning of year prices of 3
stocks are $25, $30, and $65, respectively. The end of year prices of 3 stocks are $20, $23, and
$86, respectively. What is the return on the price-weighted index over the year?
Select one:

Consider the following data concerning the expected return and standard deviation of a stock A
and a stock B with a correlation of 0.5.
Expected
Return Standard
Deviation
Stock A
16%
20%
Stock B
10%
15%
A new portfolio is formed with 25% invested in A and 75% invested in B. Determine the expected
return of the new portfolio.

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Step 1 Note

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Step 2 Introduction of price weighted index

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Step 3 Total value of all stocks at starting of the year

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Step 4 Calculation of Beginning Index value

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Step 5 Calculation of Total value of all stocks at the end of the year

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Step 6 Calculation of Ending Index value

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Step 7 Calculation of Numerical loss or gain on investment

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Step 8 Calculation of Rate of return of the index

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