###
**CFA Practice Question**

The following 4 stocks are the components of unweighted index (series). Prices and # outstanding at market close on January 1 are given in the table below. After market close on January 1, there is a 4 for 1 stock split for stock P. Price after market close on January 2 are also given in the table below.

M | $12 | 2 M | $14

N | $20 | 4 M | $18

O | $32 | 3 M | $32

P | $16 | 5 M | $5

Stock | Price (Jan 1) | # Outstanding (Jan 1) | Price (Jan 2)

M | $12 | 2 M | $14

N | $20 | 4 M | $18

O | $32 | 3 M | $32

P | $16 | 5 M | $5

On January 1 the index had a value of 100. What is the return to the unweighted index from Jan 1 market close to January 2 market close?

A. 5.71%

B. 1.47%

C. 7.92%

**Explanation:**The way to calculate an unweighted index is to assume $1 has been invested in each of the stocks.

###
**User Contributed Comments**
10

User |
Comment |
---|---|

pstebelp |
This is not the arithmetic or geometric average! |

chantal |
the actual mvnt of the index SB based on the arithmetic mean of the % change in price or the geographical mean of the price changes. Doing so I get 0.75686 -1= lose of 25% anybody knows why? |

reganbaha |
the answer is right. Answer = 7.917% |

andrewmorgan |
chantal dont forget the stock split |

safash |
cn sumone do the calculations plz |

emma51 |
Anyone? |

Fannou2a |
((14/12)+(18/20)+(32/32)+(20/16))/4 -1 |

moneyguy |
A little more detail would be helpful, reganbaha. |

Rivermax |
Thanks Fannou2a |

GBolt93 |
so unweighted and equally weighted are the same? |