The CEO of JH capital wants to construct a capitalization weighted index of the 5 firms with highest P/E ratio at t=0. Y

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899604
Joined: Mon Aug 02, 2021 8:13 am

The CEO of JH capital wants to construct a capitalization weighted index of the 5 firms with highest P/E ratio at t=0. Y

Post by answerhappygod »

The CEO of JH capital wants to construct a capitalization
weighted index of the 5 firms with highest P/E ratio at t=0. You
are asked to create a market capitalization index of these 5 firms.
The market capitalization and P/E ratio of the firms under
consideration are given below. If the index is to start at a base
level of 545 at t=0, then what is the level of the index at
t=1?
Firms
P/E (t=0)
Cap (t=0)
Cap (t=1)
A
1.2
91.35685
113.4428
B
0.8
94.3791
94.99527
C
0.9
112.8532
105.212
D
1.3
110.21
104.387
E
1.4
93.15134
111.5247
F
1.5
91.73315
92.16071
G
0.6
111.6044
114.4224
H
0.7
107.5466
93.36558
I
0.9
105.5525
99.39542
J
1
103.6381
97.66503
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Post Reply