- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 2. Security Market Indexes
- Subject 2. Index Construction and Management
CFA Practice Question
A price-weighted index in which a $50 stock increased by 10% and a $40 stock decreased by 12.5% would ______
B. stay the same.
C. increase by 1.5 points.
A. decrease by 2.6 points.
B. stay the same.
C. increase by 1.5 points.
Correct Answer: B
The $50 stock would increase by $5. The $40 stock would decrease by $5. The two price changes would exactly cancel each other out in a price-weighted index, so the index would remain unchanged.
User Contributed Comments 2
| User | Comment |
|---|---|
| Done | 50 + 40 = 90 50(1.10)+ 40(1-.125) = 90 NO CHANGE |
| Bibhu | another easier method is 50*10-40*12.5=0. So no change. |