Below is the information on the stock prices and shares outstanding of three stocks. Notice that for the ease of calculation, the prices and shares outstanding are approximations of these firms' recent real numbers. Assuming that you are investing a total of $2,106,300 in these three stocks, answer questions (a) through (d) accordingly.

 Company     Price at t=0      Price at t=1    Shares Outstanding (M)

 Barnes & Noble .  $ 5                 $ 4                     50

 Best Buy               $ 85               $ 90                  250

 Kohl's                   $ 50                $ 47                  160



 (a) What is the return per share from t=0 to t=1 for each of the three stocks, respectively?

 (b) If your investment is to mimic a price-weighted index consisting of these three stocks, how much would you invest in each stock at t=0? How many shares of each stock will you hold from t=0 to t=1? What is the total value of your investment at t=1? What is the return of your investment? How do you calculate the return using the value of your investment at t=0 and t=1? How do you calculate the portfolio return as a price-weighted average of the individual stock returns?

(c) If your investment is to mimic a market value-weighted index consisting of these three stocks, how much would you invest in each stock at t=0? How many shares of each stock will you hold from t=0 to t=1? What is the total value of your investment at t=1? What is the return of your investment? How do you calculate the return using the value of your investment at t=0 and t=1? How do you calculate the portfolio return as a market valueweighted average of the individual stock returns?

(d) If your investment is to mimic an equally-weighted index consisting of these three stocks, how much would you invest in each stock at t=0? How many shares of each stock will you hold from t=0 to t=1? What is the total value of your investment at t=1? What is the return of your investment? How do you calculate the return using the value of your investment at t=0 and t=1? How do you calculate the portfolio return as an equally-weighted average of the individual stock returns?

Answer rating: 100% (QA)

a Return per share from t0 to t1 for each of the three stocks For Barnes Noble Return per share Price at t1 Price at t0 Price at t0 Return per share 4 5 5 Return per share 1 5 Return per share 020 or ... View the full answer