Question

A market value weighted index has three stocks in it, call them A, B, and C, priced at 38, 31, and 77 per share. Each firm has 222, 262 and 170 thousand shares outstanding, respectively. The value of the index at that time is 723. Over the course of the next quarter, the prices of the three stocks change to 65, 70, 78, respectively. What is the new value of the index?

An investor buys a corporate bond fund that pays an interest rate of 5.77 percent. If the investor pays a marginal tax rate of 45.9 percent, what is his after-tax yield?

Answer 1

1.
=(222*65+262*70+170*78)/(222*38+262*31+170*77)*723
=1122.493591

2.
=5.77%*(1-45.9%)
=3.1216%