# Price Weighted Vs Value Weighted

I thought we always adjust denominator for price-weighted index. This example does not seem to adjust that way though? ----------------------------- An index was recently begun with the following two stocks: * Company A – 50 shares valued at \$2 each. * Company B – 10 shares valued at \$10 each. Given that the value-weighted index was originally set at 100 and Company A’s stock is currently selling for \$4 per share while Company B’s stock is still at \$10 per share, what is the current value of the price-weighted index and the value-weighted index? Price-weighted Value-weighted A) 7, 150 B) 7, 300 C) 8, 150 D) 8, 300

Price weighted index has downward bias if a stock split occurs.

Ohhh…right, there’s no splits here. it is only trading at higher price. i was reading question wrong. Thanks much.

A I get 150 for value weighted. I don’t see any need for adjustments in the prrice weighted, there is no split mentioned… so sum of current prices/# stocks is 14/2 = 7

Chi Paul Wrote: ------------------------------------------------------- > A > > I get 150 for value weighted. > > I don’t see any need for adjustments in the prrice > weighted, there is no split mentioned… so sum > of current prices/# stocks is 14/2 = 7 CORRECT.