### 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.

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 Comments10

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?