Assingment 1 Answer Sheet - Question Part Math Answer 1a i Day 0 Index =(25 45 40\/d = 100 Divisor = 1.1 Day 1 Index =(21 48 42\/1.1 = 100.91 Index Return

Assingment 1 Answer Sheet - Question Part Math Answer 1a i...

This preview shows page 1 - 4 out of 12 pages.

QuestionPartMathAnswer1aiDivisor = 1.1Day 1 Index = (21+48+42)/1.1 = 100.91Divisor = 1.1iiIndex Return = 100.91/100 - 1 = 0.91%Index Return = 0.91%iiiDivisor = 0.892ivDivisor = 0.8231biDivisor = 6,500Divisor = 6,500iiIndex Return = 104.308/100 - 1 = 4.31%Index Return = 4.31%iiiDivisor = 6,500ivDivisor = 5426.241cDay 0 Index = 7,200*3 =$21,600Index Return = 21,288/21,600 - 1 = -1.44%Index Return = -1.44%1di2.73 Shares per stocksii2.7 Shares per stocksDay 0 Index = (25+45+40)/d = 100Divisor = 1.1Day 1 Index = (21+48+21)/d = 100.91Divisor = 0.892Day 1 Index = (21+48+14)/d = 100.91Divisor = 0.823Day 0 Index = (25*2000 + 45*8000 + 40*6000)/d = 100Divisor = 6,500Day 0 Index = (21*2000 + 48*8000 + 42*6000)/6500 = 104.308Divisor = 6,500 as the stock split will still result in the same market capDay 1 Index = (21*2000 + 48*8000 + 42*6000)/d = 104.308Divisor = 5426.24Stock weightingA = 288B = 160C = 180Results in a market cap of $7,200 per stockDay 1 Index = (21*288 + 48*160 + 42*160) = $21,288Price Weighted Index2.73 shares per stockValue Weighted IndexRatio of market cap for A:B:C is 50:360:240Therefore, the weighting for stocks are:A = 50/650*$300 = $23.08 = 0.92 stocksB = 360/650*$300 = $166.154 = 3.69 stocksC = 240/650*$300 = $110.769 = 2.77 stocksShares of A = 0.92Shares of B = 3.69Shares of C = 2.77Equal Weighted IndexShares of A = $100/$25 = 4 sharesShares of B = $100/$45 = 2.22 sharesShares of C = $100/$40 = 2.5 sharesShares of A = 4Shares of B = 2.22Shares of C = 2.5Price Weighted Index2.7 shares per stockValue Weighted IndexRatio of market cap for A:B:C is 42:384:252Therefore, the weighting for stocks are:A = 42/678*$300 = $18.58 = 0.885 stocksB = 384/678*$300 = $169.91 = 3.54 stocksC = 252/678*$300 = $111.504 = 2.655 stocksShares of A = 0.885Shares of B = 3.54Shares of C = 2.655
Background image
Equal Weighted IndexShares of A = $100/$21 = 4.76 sharesShares of B = $100/$48 = 2.08 sharesShares of C = $100/$42 = 2.38 sharesShares of A = 4.76Shares of B = 2.08Shares of C = 2.38
Background image
QuestionAnswer2a2b2c2d2e2f2g2hWe would expect Bank of America to have a higher expected Beta compared to that of Coca-Cola2010-2015. The banking industry was still recovering from the 2008 housing crisis. This also led toforced banks to change and adjust to meet new Federal guidlines. Therefore, the riskiness of holdstock would be a larger risk than holding a stock from the beverage industry. The beverage industrvalue type company stocks compared to the banking industry, which means less market volitilitycompany returns. Finally it is important to note that the beverage industry faces less macro-econo
Background image
Image of page 4

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture