Question

Three stocks have share prices of $12, $75, and $30 with total market values of $400 million, $350 million and $150 million respectively. If you were to construct a price-weighted index of the three stocks what would be the index value?A. 300B. 39C. 43D. 30

Answer 1

Answer:

B. 39

Step-by-step explanation:

The total market share values of the stocks does not influence on the price-weighted index, as the index is simply obtained by the sum of all share prices divided by the number of different stocks. The price-weighted index of the three stocks  is:

$I=\frac{\ 12+\ 75+\ 30}{3}\\I=\ 39$

The answer is alternative B. 39.