Question

A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $22, $32, and $70. The number of outstanding shares for each is 780,000 shares, 680,000 shares, and 380,000 shares, respectively. If the stock prices changed to $26, $30, and $72 today respectively, what is the 1-day rate of return on the index?

• 4.52%

• 3.85%

• 2.69%

• 6.05%

Answer 1

Base Index : Sum [ Shares * price ]

Stock	No. of Shares	Price	Value
1	780000	$   22.00	$ 1,71,60,000.00
2	680000	$   32.00	$ 2,17,60,000.00
3	380000	$   70.00	$ 2,66,00,000.00
Base Index			$6,55,20,000.00

Index After a Day : Sum [ Shares * price ]

Stock	No. of Shares	Price	Value
1	780000	$   26.00	$ 2,02,80,000.00
2	680000	$   30.00	$ 2,04,00,000.00
3	380000	$   72.00	$ 2,73,60,000.00
Index at the end of day 1			$6,80,40,000.00

Inc in index = [ Day1 ending ending index / Base Index ] - 1

= [ 68040000 / 65520000 ] - 1

= 1.0385 - 1

= 0.0385 i.e 3.85%

option B is correct.