Assume the following information about an equally-weighted index comprised of 3 stocks: A, B, and C.

Security | Price (Beginning) | Price (End) | Total Dividends
A | 5 | 6 | 1
B | 8 | 7 | 0
C | 10 | 15 | 2

The total return of the index is ______.

A. 19.2%
B. 18.8%
C. 32.5%

Correct Answer: C

The price return of A: (6+1-5) / 5 = 40%. The price return of B: (7-8) / 8 = -12.5%. The price return of C: (15+ 2 - 10) / 10 = 70%. Since the index is equally weighted, the price of the index is (1/3) 40% + (1/3) (-12.5%) + (1/3) 70% = 32.5%.