You want to create a price-weighted index consisting of the following three stocks. At t = 0,
you arbitrarily set the initial value of the index at 100.
Stock A Stock B Stock C

	Stock A	Stock B	Stock C
August (t=0) Share Price	$20	$50	$90
September (t=1) Share Price	$24	$55	$108

(a) Given a (hypothetically) same percentage change in price – e.g., 1% - which stock will
have the greatest impact on the value of index? Why? Explain in words.

Answer rating: 100% (QA)

In a priceweighted index the relative weight of each stock is determined by its share price rather t... View the full answer