A market-capitalization weighted index gives the ______.

A. highest-priced stock the most impact on the index
B. stock with the highest market capitalization the most impact on the index
C. stock with the highest percentage price change the most influence on the index

Correct Answer: B

Market-Capitalization Weighted Index: Each company in the index is weighted by its own total market value as a percentage of the total market value for all firms in the index. Most major indices, such as the S&P 500, S&P 400, and the NYSE Index are market-value-weighted. With value-weighted indices, large firms tend to be weighted more heavily than smaller firms.