### CFA Practice Question

There are 275 practice questions for this study session.

### CFA Practice Question

There is a price-weighted market index composed of four stocks. The prices of the four stocks are \$123, \$143, \$43, and \$304. Assuming that the price of the \$123 stock increased by 9%, by how much would the index change?

A. The index would decrease by 0.2%.
B. The index would increase by 1.8%.
C. The index would increase by 2.5%.

The numerator of the index is simply the sum of the four stock prices. Before the increase in the \$123 stock, the numerator would have a value of 613. After the increase, the numerator would have a value of 624.07 ((123 x 1.09) + 143 + 43 + 304 = 624.07). Regardless of what the divisor is, this will result in a 1.8% increase in the index (624.07/613 - 1).

User Comment
tony1973 no the formula is correct. you can also say: (624.07-613)/613.
vrs3 Isn't the formula....624.07-613/613.
vvenkatr You have to assume that the prices of the other three stocks do not change.
o123 ...is that really such a difficult assumption?
eb2568 you can also take (123/613) which is .2007 and multiply by .09 and it is .0181. This saves a little time i think.
uma85 Day 1 : 123+143+43+304= 613/4 = 153.25

Day 2 : (123*.09)+143+43+304= 624.07/4 = 156.01

Day to Day % change = (Day 2/ Day 1) - 1

(156.01/153.25) - 1 = .018 or 1.8 %
DonAnd That's exactly the way I did it uma85
jonan203 vrs3: