Consider the three stocks in the following table. Pt represents price at time t, and Qtrepresents shares outstanding at time t. Stock C splits two-for-one in the last period.ABCРо9050100Rate of return90100200200P19545110Rate of returnb. An equally weighted indexRequired:Calculate the first-period rates of return on the following indexes of the three stocks: (Donot round intermediate calculations. Round answers to 2 decimal places.)a. A market value-weighted index%01100200200%P295455592100200400

Rate of return The profit an investor makes from an investment is called the rate of return. It…

Answered: a. A market value-weighted index Rate…

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Finance

a. A market value-weighted index Rate of return b. An equally weighted index %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 7P

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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

Consider the three stocks in the following table. Pt represents price at time t, and Qt
represents shares outstanding at time t. Stock C splits two-for-one in the last period.
A
B
C
Ро
90
50
100
Rate of return
90
100
200
200
P1
95
45
110
Rate of return
b. An equally weighted index
Required:
Calculate the first-period rates of return on the following indexes of the three stocks: (Do
not round intermediate calculations. Round answers to 2 decimal places.)
a. A market value-weighted index
%
01
100
200
200
%
P2
95
45
55
92
100
200
400

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