Consider a Value-Weighted Market Index That Includes the Two Companies

question 23

Multiple Choice

Consider a value-weighted market index that includes the two companies shown in the table. What is the percentage change in the index from Day 1 to Day 2? $$\begin{array} { | c | c | c | c | c | } \hline & \text { Company 1 } & \text { Company 1 } & \text { Company 2 } & \text { Company 2 } \\\hline \text { Day } & \text { Price } & \text { \# of Shares } & \text { Price } & \text { \# of Shares } \\\hline 1 & \$ 7.00 & 400 & \$ 10.00 & 1,500 \\\hline \mathbf { 2 } & \$ 7.24 & 400 & \$ 10.53 & 1,500 \\\hline\end{array}$$

• A)4.00%
• B)4.25%
• C)4.50%
• D)4.75%
• E)5.00%

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Definitions:

Compounded Semi-annually

Interest calculated on the initial principal and the interest that has been added on a bi-annual basis.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Hourly Rate

The amount of money paid or earned for each hour of work.

Equivalent

Equal in value, amount, function, meaning, etc.