Homework SourseYou are given the following information concerning two stock
You are given the following information concerning two stocks that make up an index. What is the percentage value-weighted return for the index?
| Shares Outstanding | Beginning of Year Price | End of year Price | |
| Kirk, Inc. | 46,000 | $83 | $90 |
| Picard Co. | 60,000 | 40 | 52 |
Solution
Beginning value = [($83 × 46,000) + ($40 × 60,000)] / 2 = $3,109,000
Ending value = [($90 × 46,000) + ($52 × 60,000)] / 2 = $3,630,000
Return = ($3,630,000-$3,109,000) / $3,109,000 = 16.76%
Note you could also solve the problem as:
Beginning value = ($83 × 46,000) + ($40 × 60,000) = $6,218,000
Ending value = ($90 × 46,000) + ($52 × 60,000) = $7,260,000
Return = ($7,260,000 – 6,218,000) / $6,218,000 = 16.76%
The interpretation in this case is the percentage increase in the market value of the market.
