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Answer: 35%. This is the stock's weight calculated using the market-capitalization-weighted method.
The correct answer is **C (35%)** because the stock's weight in a market-capitalization-weighted index is determined by dividing the market capitalization of the stock by the market capitalization of the index. Here, the calculation is $20 billion (stock) / $57 billion (index) ≈ 35%. This aligns with the market-capitalization-weighted method, which is the correct approach for this scenario. - **Option A (25%)** is incorrect as it represents the equal-weighted method (1 stock / 4 stocks). - **Option B (30%)** is incorrect as it represents the price-weighted method (stock price / index value = $30 / 100).
Author: LeetQuiz Editorial Team
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An analyst gathers the following information about a market-capitalization-weighted index and one of its four constituent stocks:
If the stock price is $30 per share and the index value is 100, the stock's weight in the index is closest to:
A
25%. This is the stock's weight if calculated using an equal-weighted method.
B
30%. This is the stock's weight if calculated using a price-weighted method.
C
35%. This is the stock's weight calculated using the market-capitalization-weighted method.
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