You have the following information:
$\begin{array}{cccc}
\text { Stock}&\text { Shares outstanding }&\text {Beginning Share Price }&\text {Ending Share Price }\
\text { A. } & 1,000 & \$ 35 & \$ 38 \
\text { B } & 2,000 & \$ 22 & \$ 23
\end{array}$

You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value?
A)93.44
B)98.10
C)107.02
D)108.36
E)110.40

Question

You have the following information:
$\begin{array}{cccc}
\text { Stock}&\text {  Shares outstanding }&\text {Beginning Share Price }&\text {Ending Share Price }\
\text { A. } & 1,000 & \$ 35 & \$ 38 \
\text { B } & 2,000 & \$ 22 & \$ 23
\end{array}$

You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value?
A)93.44
B)98.10
C)107.02
D)108.36
E)110.40

Quizplus · Accepted Answer

The beginning price-weighted index is calculated by taking the sum of the beginning share prices of the stocks and dividing by the number of stocks. For stocks A and B, this is $(35 + 22) / 2 = 57 / 2 = 28.5$. To scale this to 100, we find a multiplier, $m$, such that $28.5m = 100$, which gives $m = 100 / 28.5$. The ending index value is calculated by taking the sum of the ending share prices and applying the same multiplier. So, $(38 + 23) / 2 \times m = 61 / 2 \times (100 / 28.5) = 30.5 \times 3.50877 = 107.02$.

You Have the Following Information You Want the Beginning Price-Weighted Index of These Two Stocks