Explanation:
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.
$30 / 100).Ultimate access to all questions.
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.
No comments yet.