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  3. assume that a market comprises four stocks: monash

Assume that a market comprises four stocks: Monash, Deakin, La Trobe and Flinders. Current information...

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Finance

Assume that a market comprises four stocks: Monash, Deakin, La Trobe and Flinders. Current information about each of these stocks is provided in the table below:

Monash

Deakin

La Trobe

Flinders

Price at time t

$20

$12

$8

$6

Number of Shares on Issue (mill)

1500

800

600

400

Market Capitalisation ($ mill)

$30,000

$9,600

$4,800

$2,400

Price at time t+1

$21

$13

$6

$6

You are developing a new index fund with $2 million to invest.

  1. Calculate the number of stocks you would need to buy for each company to construct the following indices;
    • Value-weighted
    • Equal-weighted
    • Price-weighted

Calculate the returns in the year to t+1 for each of the three indices constructed above

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