Answer: 111.7.

## Explanation For an equal-weighted index that is **not rebalanced**, we need to calculate the price-weighted average return of the stocks, not the market-cap weighted return. **Step 1: Calculate the price return for each stock** - Stock 1: (€36 - €30) / €30 = 6/30 = 0.20 or 20% - Stock 2: (€45 - €50) / €50 = -5/50 = -0.10 or -10% - Stock 3: (€50 - €40) / €40 = 10/40 = 0.25 or 25% **Step 2: Calculate the average return** Since it's an equal-weighted index with 3 stocks: Average return = (20% + (-10%) + 25%) / 3 = (35%) / 3 = 11.667% **Step 3: Calculate the ending index value** Beginning index value = 100 Ending index value = 100 × (1 + 0.11667) = 100 × 1.11667 = 111.667 Rounded to one decimal place, this is 111.7. **Why this approach?** - For an equal-weighted index that is NOT rebalanced, the weights drift over time as prices change. - However, the question asks for the index value if it's "not re-balanced during the year," which means we calculate the return based on the initial equal weights. - The average of the individual stock returns gives us the index return. **Verification:** The equal-weighted index return is simply the arithmetic average of the constituent returns, which is 11.667%. Applying this to the starting index value of 100 gives 111.667 ≈ 111.7.

Author: LeetQuiz .