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The Tiny stock market has two stocks: Company A and Company B. End-of day data for three days are shown in the table. The Tiny
The Tiny stock market has two stocks: Company A and Company B. End-of day data for three days are shown in the table. The Tiny Market Index is a value-weighted index on the Tine market. Answer the questions that follow. Company A Company B # of Shares # of Shares Day Price Price Outstanding Outstanding 1,900 1 $8 500 $11 2 $8.56 500 $12.1 1,900 3 $8.817 500 $12.705 1,900 Part 1: You created a portfolio on Day 1 to mimic the index. What is the portfolio weight on Company A? Express your answer in percentage form rounded to two decimal places. Part 2: Calculate the return on the Tiny Market Index and the return on your mimic portfolio from Day 1 to Day 2. What is the difference? (Portfolio return minus Tiny Market Index return.) Express your answer in percentage form rounded to two decimals. Part 3: What portfolio weight for Company A do you need to have on Day 2 in order to earn a return on your mimic portfolio from Day 2 to Day 3 which is equal to the percentage change in the Tiny Market Index? Express your answer in percentage form rounded to two decimals. % Part 4: What trades did you have to make on Day 2 to adjust your portfolio so that it tracked the index from Day 2 to Day 3? no trades buy A and sell B sell A and buy B
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