An Index Consists of the Following Securities and Has an Index

question 8

Multiple Choice

An index consists of the following securities and has an index divisor of 3.0. What is the price-weighted index return?
$\begin{array}{cccc}\text { Stock } & \text { Shares Outstanding } & \text { Beginning Share Price}&\text{ Ending Share Price } \\\text { A } & 4,000 & \$ 21 & \$ 16 \\\text { L } & 1,000 & \$ 49 & \$ 61 \\\text { S } & 3,000 & \$ 37 & \$ 38\end{array}$

• A)-4.76%
• B)-2.05%
• C)3.09%
• D)5.17%
• E)7.48%

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Definitions:

Expected Rate of Return

The anticipated return on an investment, based on the probability of various outcomes, including both risky and risk-free returns.

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean, often used in finance to gauge investment risk.

Risky Asset

An investment that holds a significant chance of losing some or all of its value, offering the potential for higher returns to compensate for higher risk.

Risk-Averse

A characteristic of investors who prefer lower risk investments, opting for certainty and stability in their investment choices.