A value weighted index has three stocks with 200 shares of A, 800 shares of B, and 500 shares of C. On day one their prices are A at $25, B at $28, C at $48. On day two the index is
A) 106.3.
B) 99.6.
C) 104.2.
D) 101.8.

Question

Quizplus · Accepted Answer

To calculate the value-weighted index, find the total market value for each day and compare. Day 1: (200*$25) + (800*$28) + (500*$48) = $58,400. Day 2: Assume prices change proportionally to the index change. The index on day 2 is calculated by dividing the total market value on day 2 by the total market value on day 1 and multiplying by 100. If the index is 101.8, it indicates a slight increase from day 1.

A Value Weighted Index Has Three Stocks with 200 Shares