Question

Explain the difference between Price-Weighted Index and Value-Weighted Index.

Answer #1

ANS : Price-weighted Index is an index where the member companies are weighted in propoortion to their price per share, rather than the number of shares outstanding, market capitalisation etc. It gives greater weight to stock with higher prices in terms of their contribution to the index value & the change in the Index.

Value-weighted Index is also called Capitalisation-weighted Index. It is a Index where components are weighted according to the total market value of their outstanding shares.

In value-weighted Index, ABC would have more impact in the movement of index, But in case of price-weighted it would have less impact as its price is lower.

What are examples and advantages of a price-weighted stock index
and a market value-weighted stock index?

5. A price-weighted index has 3 stocks: A, B and C. Their price
at the start of the index was $35, $48 and $90.
What is the initial divisor if the index start with a value of
100?
By the end of the first year, the price of the 3 stocks is $40,
$52 and $83 respectively. How much has the index gone up?
If stock C has a 3-for-1 split, what would be the new index
value after one...

The Hydro Index is a price weighted stock index based on the 4
largest boat manufacturers in the nation. Consider the four stocks
in the following table. Pt represents price at time t,
and Qt represents shares outstanding at time t. (Please pay close
attention to stock split)
P0
Q0
P1
Q1
P2
Q2
A
80
200
90
200
98
200
B
50
300
40
300
50
300
C
90
200
110
200
115
200
D
100
100
90
100...

What caused the difference between the estimate of a stock's
value and its market price based on the Dividend Discount Model?
Please explain.

The time value of a call option is
I) the difference between the option's price and the value it
would have if it were expiring immediately.
II) the same as the present value of the option's expected
future cash flows.
III) the difference between the option's price and its expected
future value.
IV) different from the usual time value of money concept.

1. When computing a value-weighted index, we use a
"Divisor".
True
False
2. The primary market for stocks is the IPO market, not the
stock market.
True
False
3. An index has a market value of 13,447.25 at the beginning of
the period and 13,893.57 at the end of the period. If you want the
beginning index value to be 2,000, what will be the ending index
value?
a.
2,000
b.
13,893.57
c.
13,447.25
d.
none
ANSWER all or i...

A price-weighted index consists of stocks A, B, and C which are
priced at $38, $24, and $26 a share, respectively. The current
index divisor is 2.7. What will the new index divisor be if stock B
undergoes a 3-for-1 stock split? (Round your final answer to four
decimal points.)

Explain the difference between options and futures.

Explain the difference between hypoxemia and hypoxia.

Explain why the interest earned on a deposit is equal to the
difference between the future value and the present value. In your
response be sure to clearly define future and present value

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