Homework SourseYou are given the following information concerning two stock
You are given the following information concerning two stocks that make up an index. Assume the value-weighted index level was 417.44 at the beginning of the year. What is the index level at the end of the year?
| Shares Outstanding | Beginning of Year Price | End of year Price | |
| Kirk, Inc. | 44,000 | $82 | $93 |
| Picard Co. | 56,000 | 43 | 47 |
Solution
Index Level at the end of the year
Beginning value = [($82 × 44,000) + ($43 × 56,000)] / 2 = $3008000
Ending value = [($93 × 44,000) + ($47 × 56,000)] / 2 = $3362000
Return = (Ending Value - Beginning value) / Beginning Value
Return = ($3362000 – $3008000) / $3008000 = 11.77%
Index Value at the year end = Beginning year index * ( 1 + Return)
Index Value at the year end = 417.44 * ( 1 + 0.1177)
Index Value at the year end = 466.57
