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
Posted: Mon May 02, 2022 8:49 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. 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
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