You have two stock indexes, one price-weighted and one value-weighted, with the same two stocks, TUL...
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You have two stock indexes, one price-weighted and one value-weighted, with the same two stocks, TUL and NOLA. At the beginning of the period, TUL has a price of $12. At the end of the period, TUL's price is $18. NOLA's price doubles over the period, rising from $20 to $40. TUL has 2,000,000 shares outstanding, while NOLA has 1,000,000. No dividends are paid. Calculate the returns to the value-weighted index. Calculate the returns to the price-weighted index. If NOLA had more shares outstanding, but the same price (assume the number of shares and price of TUL stay the same), how would the value-weighted and price-weighted index returns change? Why? You have two stock indexes, one price-weighted and one value-weighted, with the same two stocks, TUL and NOLA. At the beginning of the period, TUL has a price of $12. At the end of the period, TUL's price is $18. NOLA's price doubles over the period, rising from $20 to $40. TUL has 2,000,000 shares outstanding, while NOLA has 1,000,000. No dividends are paid. Calculate the returns to the value-weighted index. Calculate the returns to the price-weighted index. If NOLA had more shares outstanding, but the same price (assume the number of shares and price of TUL stay the same), how would the value-weighted and price-weighted index returns change? Why?
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To calculate the returns for the valueweighted index we first need to find the market value of each ... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Posted Date:
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