Consider the following three stocks: $\begin{array}{lll}
\underline{\text { Stock }} &\underline{ \text { Price } }&\underline{ \text { Number of shares outstandins} } \
\text { Stock A } & \$ 40 & 200 \
\text { Stock B } & \$ 70 & 500 \
\text { Stock C } & \$ 10 & 600
\end{array}$

-The price-weighted index constructed with the three stocks is
A)30
B)40
C)50
D)60
E)70

Question

Consider the following three stocks: $\begin{array}{lll}
\underline{\text { Stock }} &\underline{ \text { Price } }&\underline{ \text { Number of shares outstandins} } \
\text { Stock A } & \$ 40 & 200 \
\text { Stock B } & \$ 70 & 500 \
\text { Stock C } & \$ 10 & 600
\end{array}$

-The price-weighted index constructed with the three stocks is
A)30
B)40
C)50
D)60
E)70

Quizplus · Accepted Answer

To calculate a price-weighted index, we need to find the sum of the prices of all the stocks and divide it by the total number of stocks.

Total Price = (40 x 200) + (70 x 500) + (10 x 600) = 20,000 + 35,000 + 6,000 = 61,000

Total Number of Stocks = 200 + 500 + 600 = 1,300

Price-Weighted Index = Total Price / Total Number of Stocks = 61,000 / 1,300 = 47

Therefore, the closest answer choice is B) 40.

Consider the Following Three Stocks -The Price-Weighted Index Constructed with the Three Stocks Is A)30

Consider the Following Three Stocks -The Price-Weighted Index Constructed with the Three Stocks Is
A)30