When Constructing a Stock Market Index, Which Two Items Are

question 22

Multiple Choice

When constructing a stock market index, which two items are needed to start the index?

• A) the starting date and an estimate of future prices.
• B) the starting date and the base index value.
• C) the starting and ending dates of the index.
• D) 1,000 is the base value, combined with the starting date.

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Definitions:

Purchasing Power

The measure of what one unit of currency can buy in terms of goods or services.

Compounded Monthly

The practice of calculating interest on the principal and the accumulated interest each month.

Compounded Semiannually

Interest that is calculated and added to the principal balance twice a year.

Equivalent Rate

The interest rate that would produce the same compounded financial result over a specific period as a differently compounded interest rate.