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