In addition to price-weighted and value-weighted indexes, on equally weighted in
ID: 2826758 • Letter: I
Question
In addition to price-weighted and value-weighted indexes, on equally weighted index is one in which the indexc value is computed from the averoge rote of return of the stocks comprising the index. Equally weighted indexes are frequently used by financial researchers to measure portfolio performance. Suppose the following three defense stocks are to be combined into a stock index in January 2016 (perhapsa portfolio manager believes these stocks are an appropriste benchmark for his or her performance): Price Shares 1/16 1/1/17 1//18 (millions) Douglas McDonnell Dynamics General 49 78 43 67 57 81 455 Intermational Rockwel 290 What is the percentage rate of return on this index for the year ending December 31, 2016? Round your answer to 2 decimal places. Omit the"% sign in your response.)Explanation / Answer
Price at 01/01/2016
price at 31/01/2016
% change (price at year end/price at start of year)
DM
540
62
66
6.45
DG
455
49
43
-12.24
IR
290
78
67
-14.10
Sum
-19.90
Average return = sum/3
-19.60/3
-6.63
% rate of return at 31/12/2016
-6.63
Price at 01/01/2016
price at 31/01/2016
% change (price at year end/price at start of year)
DM
540
62
66
6.45
DG
455
49
43
-12.24
IR
290
78
67
-14.10
Sum
-19.90
Average return = sum/3
-19.60/3
-6.63
% rate of return at 31/12/2016
-6.63
Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.