Value-weighted index

An analyst gathered the following data about stocks J, K, and L, which together form a value-weighted index: December 31, Year 1 December 31, Year 2 Stock Price Shares Price Shares J $40 10,000 $50 10,000 K $30 6,000 $20 12,000* L $50 9,000 $40 9,000 *2-for-1 split The ending value-weighted index (base index = 100) is closest to: A. 92.31. B. 93.64. C. 106.80. D. 108.33.

Answer is C. You dont have to worry about stock splits as the Value-Weighted method will automatically adjusts itself. (As the # of stock increases, the px of each share will fall by the same proportionate amount). Therefore, [(50 x 10,000) + (20 x 12,000) + (40 x 9000)] / [(40 x 10,000) + (30 x 6,000) + (40 x (9,000)] x 100 = 106.79 ~ 106.80

Thanks toniwestern!