# Equity Investments - Equity Investments Section 1

>>>>>>>>Equity Investments Section 1

• Option : C
• Explanation : Most major indices are reconstituted periodically.

• A

the indices have not been rebalanced.  • B

the indices have not been reconstituted.  • C

the constituent securities do not pay dividends or interest.  • Option : C
• Explanation : Income generated over time by underlying securities in terms of dividend or interest creates a difference between a price return index and a total return index consisting of identical securities and weights. If the securities in the index do not generate income, both indices will be identical in value.

 Security Beginning of periodprice (Rs.) End of period price(Rs.) Total Dividend (Rs.) HBL 148 153 8 FFCL 104 110 5 EFOODS 110 90 4

• A

-2.5%.  • B

-2.9%.  • C

-10.9%  • Option :
• Explanation : The price return of the price-weighted index is the percentage change in price of the index: (353-362) / 362 = - 2.49%. Security price Beginning of period End of period price HBL 148 153 FFCL 104 110 EFOODS 110 90 TOTAL 362 353

 Security Beginning of Period Price End of Period Price Dividends per share Share Outstanding ABC 1,500 1,700 10 6,000 DEF 2,500 1,500 15 8,500 GHI 500 600 10 10,000

• A

-10.33%.  • B

-17.87%.  • C

-13.90%.  • Option : B
• Explanation : The price return of the index is (28,950,000 - 35,250,000) / 35,250,000 = -17.87%.

 Beginning of period End of period Security Price \$ Shares Price\$ Shares A 10 100 15 100 B 40 150 38 150 B 40 150 38 150

• A

10.61%.  • B

17.1%.  • C

21.4%.  • Option : A
• Explanation : The sum of prices at the beginning of the period is 66; the sum at the end of the period is 73. Regardless of the divisor, the price return is 73 − 1 = 0.1061 or \$10.61%.