Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Based on the following stock price and shares outstanding information, compute the beginning and ending values for a price-weighted index and a market-value-weighted index.
December 31, 2018 December 31, 2019
Price Shares Shares
Outstanding Price Outstanding
Stock K 20 100,000,000 32 100,000,000
Stock M 80 2,000,000 45 4,000,000*
Stock R 40 25,000,000 42 25,000,000
*Stock split two-for-one during the year.
a. Compute the percentage change in the value of each index during the year.
b. Explain the difference in results between the two indexes.
c. Compute the percentage change for an un-weighted (equal weight $ 1000 is invested in each stock )index and discuss why these results differ from those of the other indexes.
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