Below is the information on the stock prices and shares outstanding of four stocks. Note...

50.1K

Verified Solution

Question

Finance

Below is the information on the stock prices and shares outstanding of four stocks. Note that the numbers are for illustration purposes and do not reflect the most updated market information on these stocks. Assume that you are investing a total of $453,600 in these four stocks to construct different types of indexes with them as the constituent stocks. Answer the following questions.

Constituent Stock Price at t = 0 Price at t = 1 Shares Outstanding (Million)
IBM $120 $150 9
Netflix $350 $406 4
Tesla $200 $176 2
Uber $30 $24 12

(a) To make your investment track a market-value-weighted index consisting of these four stocks, how much would you invest in each constituent stock? How many shares of each will you hold? Fill in the table below. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Constituent Stock Dollar Amount Invested Number of Shares Held
IBM $ 149,688 1247 shares
Netflix $ 195,048 557 shares
Tesla $ 54,432 272 shares
Uber $ 49,896 1663 shares

The return of this MV-weighted index from t=0 to t=1 would be _____%. (Do not round intermediate calculations. Round your answer to 2 decimal places inside the percentage sign.)

(b) To make your investment track a price-weighted index consisting of these four stocks, how much would you invest in each constituent stock? Fill in the table below. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Constituent Stock Dollar Amount Invested Number of Shares Held
IBM $ shares
Netflix $ shares
Tesla $ shares
Uber $ shares

The return of this price-weighted index from t=0 to t=1 would be ___%. (Do not round intermediate calculations. Round your answer to 2 decimal places inside the percentage sign.)

(c) To make your investment track an equally-weighted index consisting of these four stocks, how much would you invest in each constituent stock? Fill in the table below. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Constituent Stock Dollar Amount Invested Number of Shares Held
IBM $ shares
Netflix $ shares
Tesla $ shares
Uber $ shares

The return of this equally-weighted index from t=0 to t=1 would be ___%. (Do not round intermediate calculations. Round your answer to 2 decimal places inside the percentage sign.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students