Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM

31-Dec-03 31-Dec-03 31-Dec-04 31-Dec-04

Stock Price Shares Price Shares
WwW $75.00 10000 $50.00 20000
X $150.00 5000 $65.00 10000
Y $25.00 20000 $35.00 20000
z $40.00 25000 $50.00 25000

Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

Refer to Exhibit 4.5. Calculate the price-weighted series for Dec 31, 2004.

a. $725.00

b. $119.25

c. $121.25

d. $100.00

e. $81.69

Answer 1

The price-weighted series for Dec 31, 2004 can be calculated by adjusting the shares and prices of the respective stocks and then calculating the sum of the products of the adjusted shares and prices. In this case, the price-weighted series is $3,600,000.

Step-by-step explanation:

To calculate the price-weighted series for Dec 31, 2004, we need to consider the stock prices and shares for each stock on that date. According to the given information, Stocks W and X had a 2 for 1 split after the close on Dec 31, 2003. So, we need to adjust the shares and prices accordingly.

Adjusted shares for Stock W = 10000 * 2 = 20000

Adjusted shares for Stock X = 5000 * 2 = 10000

Now, calculate the price-weighted series:

(Price of Stock W * Adjusted Shares of Stock W) + (Price of Stock X * Adjusted Shares of Stock X) + (Price of Stock Y * Shares of Stock Y) + (Price of Stock Z * Shares of Stock Z)

= ($50.00 * 20000) + ($65.00 * 10000) + ($35.00 * 20000) + ($50.00 * 25000)

= $1,000,000 + $650,000 + $700,000 + $1,250,000

= $3,600,000

Therefore, the price-weighted series for Dec 31, 2004 is $3,600,000.