Price return of the index over the period

CFA Level I Equities
#1

An analyst gathers the following data for an equally-weighted index:

Beginning of Period End of Period
Security Price (¥) Shares Outstanding Price (¥) Shares Outstanding
A 20.00 300 22.00 300
B 50.00 300 48.00 300
C 26.00 2,000 30.00 2,000

Q. The return on the index over the period is:

  1. 4.2%.
  2. 6.8%.
  3. 7.1%.
    Can someone please explain the way you solve this question, the answer key seems not helpful :frowning:
#2

They are giving you more information than you need to answer the question. For an equally weighted index you can just take the average return on the share prices. I’m coming up with an average of 7.1% since the first stock returned 10%, the second -4%, and the third 15.38%.

1 Like
#3

oh yes the equal weighted index formula. Thanks a lot, sir. Have a great day!