Consider the following three stocks: $$\begin{array} { l c c }
\text { Stock } & \text { Price } & \text { Number of shares outstanding } \
\hline \text { Stock A } & \$ 40 & 200 \
\text { Stock B } & \$ 70 & 500 \
\text { Stock C } & \$ 10 & 600
\end{array}$$
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: $$\begin{array} { l c c } 
\text { Stock } & \text { Price } & \text { Number of shares outstanding } \
\hline  \text { Stock A } & \$ 40 & 200 \
\text { Stock B } & \$ 70 & 500 \
\text { Stock C } & \$ 10 & 600
\end{array}$$
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 as the sum of the market values of the stocks divided by the divisor. The market value of a stock is calculated as the price of the stock multiplied by the number of shares outstanding. Therefore, the value-weighted index is calculated as:(40 * 200 + 70 * 500 + 10 * 600) / 100 = 490

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