A price weighted index consists of 3 stocks: A, B and C. The stock price...
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Finance
A price weighted index consists of 3 stocks: A, B and C. The stock price and number of shares outstanding (in millions) for each stock on day 0 and day 1 are given in the following table:
Stock
P0
P0split
P1
Q0
Q1
A
15
3
4
20
100
B
60
60
55
1
1
C
20
20
23
3
3
P0 is the price per share on day 0 before the stock split (if there is any stock split). P0splitis the price per share on day 0 immediately after the stock split. P1is the price per share on day 1. Q0 and Q1 are the number of shares outstanding on day 0 and day 1, respectively.
Note that stock A experienced a split on day 0, where one stock split into 5 and the price per share was reduced to one-fifth of the pre-split price. Answer questions A to D below:
A. Compute the value of the price weighted index on day 0.
B. Compute the value of the price weighted index on day 1, making necessary adjustments for any stock splits.
C.What is the index return (percentage change of the price weighted index) from day 0 to day 1?
Now assume that an index consisting of stocks A, B and C are equally weighted instead. Assume the value of this equally-weighted index on day 0 is 1100. Answer question D below:
D. Compute the value of this equally-weighted index on day 1.
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