Final answer:
To calculate the value-weighted index return, you determine the market capitalizations of each stock at the beginning and end and measure the total change in value. For the given stocks, the total beginning market capitalization is $357,000, the ending is $487,000, and the index return is 36.415%.
Step-by-step explanation:
The question asks how to calculate the value-weighted index return for two stocks with different share prices and numbers of shares outstanding. This calculation factors in the market capitalization of each stock and measures the percentage change in their respective values over a period.
First, find the beginning and ending market capitalizations for each stock. For Stock A: Beginning = 14,000 shares * $18 = $252,000. Ending = 14,000 shares * $26 = $364,000. For Stock B: Beginning = 3,000 shares * $35 = $105,000. Ending = 3,000 shares * $41 = $123,000. Next, calculate the total beginning and ending market capitalizations and their change. Total beginning market cap = $252,000 (A) + $105,000 (B) = $357,000. Total ending market cap = $364,000 (A) + $123,000 (B) = $487,000. The change in market cap = $487,000 - $357,000 = $130,000.
Finally, divide the change in market cap by the total beginning market cap to find the index return: $130,000 / $357,000 = 0.36415 or 36.415%. The value-weighted index return is 36.415%.