47. Use the following information relating to a float-adjusted market-capitalization-weighted equity index. Security Shares Outstanding % of Shares in the Market Float Price End 2020 Price End 2021 Dividend per Share W 20,000 41% $61.00 $38.00 $0.85 X 15,000 37% $54.00 $51.00 $2.15 Y 20,000 53% $34.00 $35.00 $1.12 Z 9000 90% $59.00 Assume that all dividend payments are made at the end of the year. The weight of Security Y in the index on December 31, 2020 is closest to: a. 22.00% b. 30.82% c. 31.05% d. 32.22% e. 37.02%
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
47. Use the following information relating to a float-adjusted market-capitalization-weighted equity index.
|
Security |
Shares Outstanding |
% of Shares in the Market Float |
Price End 2020 |
Price End 2021 |
Dividend per Share |
|
W |
20,000 |
41% |
$61.00 |
$38.00 |
$0.85 |
|
X |
15,000 |
37% |
$54.00 |
$51.00 |
$2.15 |
|
Y |
20,000 |
53% |
$34.00 |
$35.00 |
$1.12 |
|
Z |
9000 |
90% |
$59.00 |
|
|
Assume that all dividend payments are made at the end of the year.
The weight of Security Y in the index on December 31, 2020 is closest to:
a. 22.00%
b. 30.82%
c. 31.05%
d. 32.22%
e. 37.02%
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