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An investor bought 2000 shares of Unilever Ghana Limited on 15 January 2018 through an investment broker and instructed the broker to re-invest any dividends received in additional shares of Unilever. During the year, Unilever paid three dividends. The information on dividends and share prices at the time of dividend payments is indicated below: Date Price Per share in Cedis 140 Dividend Per Share in Cedis January April 150 5 July 135 6 October 142 8 December 150 The investor calculated the return on his investment for the one year holding period and recorded 20.71%. He is not sure whether this is correct. You are required to: (a) Determine how the investor came by the 20.71% return (2 marks) (b) Explain the limitations in the calculation in (a) (3 marks) (c) Provide a correct calculation of the investor's return using (1) The index method (10 marks) The linking method (10 marks) (d) Show how much the investment is worth at the end of December and divide the investor's gain into dividend yield and capital gain in both absolute and percentage terms. (5 marks) Question Three Ghana Financial Industry Index is a market index yet to be introduced to track the performance of shares of financial companies listed on the Ghana Stock Exchange. The Index will initially contain the shares of four listed financial companies and will be adjusted as more and more financial companies get listed. The following table provides information on the share prices of the first four companies forming the index: SHARE PRICES OF COMPANIES IN PERIODS Companies Periods 1 2 4 5 8 8 9 6 16.7 A 12 12.8 14.6 15.4 18.8 19.8 B 5 6.4 3 13.6 4.2 16.5 8.0 4.2 3.6 3.8 7 17.8 2.5 13.6 7.2 5.6 5.6 16.8 15.1 12.4 17.5 12.6 8.5 10.4 D 10.2 9.4 8.0 8.0 7.5 6.4 6.4 VOLUME OF SHARES TRADED IN EACH PERIOD A 1200 1200 1200 1200 1200 1200 1200 2500 1200 2500 B 2500 2500 2500 2500 2500 2500 1500 1200 2500 1500 1000 1500 1500 1500 1500 1500 1500 1500 DO 1000 1000 1000 1000 1000 1000 1000 1000 Using a DIVISOR of 4.0 design an appropriate index based on the information above. The index should be based on all of the following. (1) Price-weighted (15 marks) (11) Equally-weighted (15 marks) (111) Value weighted (15 marks) Provide your comments on the performance of the Index and the performance of the companies in the light of the movement in the index. (5 marks) An investor bought 2000 shares of Unilever Ghana Limited on 15 January 2018 through an investment broker and instructed the broker to re-invest any dividends received in additional shares of Unilever. During the year, Unilever paid three dividends. The information on dividends and share prices at the time of dividend payments is indicated below: Date Price Per share in Cedis 140 Dividend Per Share in Cedis January April 150 5 July 135 6 October 142 8 December 150 The investor calculated the return on his investment for the one year holding period and recorded 20.71%. He is not sure whether this is correct. You are required to: (a) Determine how the investor came by the 20.71% return (2 marks) (b) Explain the limitations in the calculation in (a) (3 marks) (c) Provide a correct calculation of the investor's return using (1) The index method (10 marks) The linking method (10 marks) (d) Show how much the investment is worth at the end of December and divide the investor's gain into dividend yield and capital gain in both absolute and percentage terms. (5 marks) Question Three Ghana Financial Industry Index is a market index yet to be introduced to track the performance of shares of financial companies listed on the Ghana Stock Exchange. The Index will initially contain the shares of four listed financial companies and will be adjusted as more and more financial companies get listed. The following table provides information on the share prices of the first four companies forming the index: SHARE PRICES OF COMPANIES IN PERIODS Companies Periods 1 2 4 5 8 8 9 6 16.7 A 12 12.8 14.6 15.4 18.8 19.8 B 5 6.4 3 13.6 4.2 16.5 8.0 4.2 3.6 3.8 7 17.8 2.5 13.6 7.2 5.6 5.6 16.8 15.1 12.4 17.5 12.6 8.5 10.4 D 10.2 9.4 8.0 8.0 7.5 6.4 6.4 VOLUME OF SHARES TRADED IN EACH PERIOD A 1200 1200 1200 1200 1200 1200 1200 2500 1200 2500 B 2500 2500 2500 2500 2500 2500 1500 1200 2500 1500 1000 1500 1500 1500 1500 1500 1500 1500 DO 1000 1000 1000 1000 1000 1000 1000 1000 Using a DIVISOR of 4.0 design an appropriate index based on the information above. The index should be based on all of the following. (1) Price-weighted (15 marks) (11) Equally-weighted (15 marks) (111) Value weighted (15 marks) Provide your comments on the performance of the Index and the performance of the companies in the light of the movement in the index

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