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Help me understand how my teacher got these solutions. Problem 2: (8 Total Points) Suppose you construct a value-weighted index of three stocks, A, B,
Help me understand how my teacher got these solutions.
Problem 2: (8 Total Points) Suppose you construct a value-weighted index of three stocks, A, B, and C. The number of shares and the share price are given in the table. Stock c Shares Outstandin 25 14 34 Share Price $18.52 $9.74 $15.48 a What is Stock B's market ca italization? 3 oints $136.36 What is Stock B's wei ht of this value-wei ted index? 3 oints 0.1211 = 12.11% (c) Suppose the overall index increased in value by five percent. What would be the impact of the index chan e on the rice of Stock B? 2 oints Unknown. Problem 3: (7 Total Points) You are considering buying shares of stock in the MNO Corporation. The forecast for the firm is steady growth over the next decade. The firm just paid its annual dividend of $0.81 per share and has plans to increase that amount by 3.4 percent annually indefinitely. You require a 7.5 percent return on this type of security. What is your estimate of the value of this stock nine years from now (hint: find the price P9). 9 = $27.6
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