Consider the following three stocks: $$\begin{array} { l c c }
\text { Stock } & \text { Price } & \text { Number of shares } \
\text { Stock A } & \$ 40 & 200 \
\text { Stock B } & \$ 70 & 500 \
\text { Stock C } & \$ 10 & 600 \
\hline
\end{array}$$ The value-weighted index constructed with the three stocks using a divisor of 100 is
A) 1.2.
B) 1200.
C) 490.
D) 4900.
E) 49.

Question

Consider the following three stocks: $$\begin{array} { l c c } 
\text { Stock } & \text { Price } & \text { Number of shares } \
\text { Stock A } & \$ 40 & 200 \
\text { Stock B } & \$ 70 & 500 \
\text { Stock C } & \$ 10 & 600 \
\hline
\end{array}$$ The value-weighted index constructed with the three stocks using a divisor of 100 is
A) 1.2.
B) 1200.
C) 490.
D) 4900.
E) 49.

Quizplus · Accepted Answer

The value-weighted index is calculated by summing the market values of the stocks and dividing by the divisor. The market values are: Stock A = $40 * 200 = $8000, Stock B = $70 * 500 = $35000, Stock C = $10 * 600 = $6000. Total market value = $8000 + $35000 + $6000 = $49000. Dividing by the divisor 100 gives 490.

Consider the Following Three Stocks The Value-Weighted Index Constructed with the Three Stocks Using a }