Question

A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $16, $24, and $55. The number of outstanding shares for each is 640,000 shares, 540,000 shares, and 240,000 shares, respectively. If the stock prices changed to $20, $22, and $57 today respectively, what is the 1-day rate of return on the index

Answer 1

The 1-day rate of return on the index = 5.36%

Step-by-step explanation:

Index Value = Sum of (Outstanding Shares*Share Price)

q p mv q1 p1 mv1

640,000 16 10240000 640000 20 12800000

540,000 24 12960000 540000 22 11880000

240,000 55 13200000 240000 57 13680000

36400000 38360000

Note: q/q1 = no of shares, p = price per share, mv/mv1 = market value, p1 = changed price per share

Return = (Index Value Today - Index Value Yesterday)/Index Value Yesterday

Return = (38360000 - 36400000) / 36400000

Return = 0.05385

Return = 5.36%