Problemsuppose you need to create a technology stock index, Ask an Expert

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Problem:

Suppose you need to create a technology stock index. You are not sure if you should do a market cap weighted index or a price weighted index. You will use 2 stocks to make this index:

Stock Price Shares Outstanding

AAPL 251 913MM

IBM 125 1,261MM

1) Calculate the weights each stock would have in a cap weighted index.

2) Calculate the weights each stock would have in a price weighted index.

3) Calculate the return of both a cap weighted index and a price weighted index if AAPL returns 5% and IBM returns 2%. Please present complete computation and also provide full description.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91146639

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