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Reading 56: Security Market Indices-LOS e 习题精选

Session 13: Market Organization, Market Indices, and Market Efficiency
Reading 56: Security Market Indices

LOS e: Calculate and interpret the value and return of an index on the basis of its weighting method

 

 

An index was recently begun with the following two stocks:

  • Company A – 50 shares valued at $2 each.
  • Company B – 10 shares valued at $10 each.

Given that the value-weighted index was originally set at 100 and Company A's stock is currently selling for $4 per share while Company B’s stock is still at $10 per share, what is the current value of the price-weighted index and the market-cap-weighted index?

Price-weighted Market-cap-weighted

A)
7 150
B)
8 150
C)
7 300


 

Price weight = [(4) + (10)] / 2 = 7

Market-cap weight = [(4)(50) + (10)(10)] / [(2)(50) + (10)(10)](100) = 150

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