Purchase Solution

Forming a stock index

Not what you're looking for?

Ask Custom Question

You have accumulated data on three stocks (see below). You have decided to use the information on these stocks to form an index. You want to find the average earned rate of return for 2011 on your index. If you follow the averaging procedure used to calculate the S&P 500 Index return, what would your index's rate of return be? Hints: Rates of return are based on beginning-of-year prices, and the S&P Index is weighted by market values of the companies in the index.

Stock Dividend Beginning Price Ending Price Sharing Outstanding (millions)
A $1.50 $30.00 $32.00 5.00
B $2.00 $28.50 $27.00 4.50
C $0.75 $20.00 $24.00 20.00

Purchase this Solution
Solution Summary

The stock dividends beginning price ending price sharing outstanding are determined.

Solution Preview

Dear Student:

The computations for this problem are in the attached Excel file. Please open the Excel file and then follow the clarifying explanations below:

The columns A-E include the given information, and columns F-H include the computation of the return of each stock. The information in columns F-H is for your information only; it is not needed to calculate the index.

Column I includes the calculation of the weight of each stock in the index, based on the number of shares outstanding (5, 4.5, and 20 million, respectively) divided by the total number of shares (29.5 million shares).

Columns J and K ...

Purchase this Solution
Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

View More Free Quizzes
Related BrainMass Solutions

  • Dictionary of gestures

    Both index fingers raised on each side of the head, forming horns, means CUCKOLD in America, or GAY person in Brazil (maybe other Hispanic cultures, too).

  • Risk-Adjusted Return Measurements

    Have a good day. This solution is comprised of step-by-step calculation to this question: Determine which stock has higher risk-adjusted returns when using the Sharpe index.

  • Price Weighted, Equal, Capitalization Weighted Index

    Price Weighted Index: A stock index in which each stock influences the index in proportion to its price per share.

  • Stock index

    Prior to do this, I will talk about stock indices of the United States under the introduction section in general way to enhance your knowledge// Introduction: A section of the stock market is evaluated with a method that is known as a stock market

  • Using the Sharpe and Treynor Indexes

    The Treynor Index measures the return of a stock relative to its risk by using its beta. The Treynor Index=(Stock Return-Risk-free Return)/Beta.

  • General Mills Employees Satisfaction regression

    Forming and evaluating a regression for a special index of satisfaction for General Mills Employees.

  • stock index futures

    284864 Stock index futures Describe stock index futures. How could they be used by a financial institution that is anticipating a jump in stock prices but does not yet have sufficient funds to purchase large amounts of stock?

  • Stock Market Index

    45806 Standard & Poor's 500 Stock Market Index Unfortunately, I do not know how Standard & Poor creates the stock market index. I do not know what would be a good index or a weak one.

  • Construct price and value weighted index

    The value weighted index shows better return as the value invested in stock A which produced lowest return is least. This post addresses how to construct a price -weighted index and value weighted index for stocks.

View More Related Solutions