Stock A has 10 million shares issued and Stock B has 5 million shares issued.What is their relative weighting if both stocks are represented in the S&P 500?
A)equal-weightings, like all S&P 500 stocks.
B)B has twice the weighting, to account for having fewer shares.
C)A has twice the weighting, to account for having more shares.
D)they are weighted according to their expected performance.

Question

Quizplus · Accepted Answer

The weighting of a stock in the S&P 500 is determined by its market capitalization, which is the number of shares outstanding multiplied by the stock price. Since Stock A has twice as many shares outstanding as Stock B, it will have twice the market capitalization and twice the weighting in the index. Therefore, Choice C is correct. The other choices are incorrect because the S&P 500 is not an equal-weighted index (Choice A), and the weighting is not determined by the number of shares issued (Choice B) or expected performance (Choice D).

Stock a Has 10 Million Shares Issued and Stock B