The share prices of Microsoft Corp., Alphabet Inc., and Apple Inc for November 30, 2020 are listed here under "Prev. Price" and for December 31, 2020 under "Price". The shares outstanding on November 30 for each company are listed under "Shares".

Consider establishing a "Big Tech" index.You use the information from the above companies to create a "BT3" index.

Suppose that Alphabet Inc. (GOOG) decides on a 10:1 stock split in December. (This did not actually happen...). Assume that Alphabet's share price on December 31 has changed accordingly (compared to the price listed in the information above).

1. For each index type explain how the divisor is adjusted to deal with the stock split. What are the "before" and "after" values of the divisor?

1. For each of the three versions of your ETF explain how the holdings must be adjusted to keep tracking the targeted index perfectly.

1. Calculate the one-month return for each of the three versions of your ETF (show your work here; not just the result).

1. Which index type would you choose as the target for your ETF? Explain your reasoning.

 

Company Prev. Price Price (P) (USD) (USD) Shares (Q) (million) MSFT 214.07 222.42 7,600 GOOG 1,760.64 1,751.88 1,755 AAPL 119.05 132.69 16,834