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

question 81

Multiple Choice

Consider a value-weighted market index that includes the following two companies. On Day 1 you form a portfolio to mimic the index. (In other words, to earn the same return as the index.) $$\begin{array} { | c | c | c | c | c | } \hline & \text { Company 1 } & \text { Company 1 } & \text { Company 2 } & \text { Company 2 } \\\hline \text { Day } & \text { Price } & \text { \# of Shares } & \text { Price } & \text { \# of Shares } \\\hline 1 & \$ 6.62 & 200 & \$ 10.00 & 750 \\\hline \mathbf { 2 } & \$ 7.24 & 200 & \$ 10.54 & 750 \\\hline\end{array}$$ What is the portfolio weight on Company 1, and what is the return on the portfolio from Day 1 to Day 2? (Weight %, Return %)

• A)14%, 5%
• B)14%, 6%
• C)15%, 6%
• D)15%, 7%
• E)16%, 5%

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