1. Which of the following is true?

a) The US is about of the value of the world stock market

b) You project that the ISM will be above 48 and rising (this essentially means the economy has positive growth and is accelerating), you will probably want to have extra weight in utility stocks during this period you are forecasting if you want to be overweight (higher weight than the index) in the best sector of the market (based on about the last 19 years of data)

c) The weight of stocks with poor performance grow in weight in market-cap weighted indices in order to keep their relative weight to other stocks constant

d) If stock A has a price of $10 and stock B has a price of $20, then stock B has half of the weight as stock A in a price-weighted index

e) The S&P 500 is an example of a market-weighted index

2. Consider the following data. The 0 or 1 after P/E and EPS (earnings per share) implies time 0 and time 1, respectively. Notice that the P/E declines, while the growth rate of EPS is positive. What is the price return of stock A over this period?

Stock	P/E 0	P/E 1	% Change in P/E	EPS 0	EPS 1	% Change in EPS
A	30	24	-20%	$1.00	$1.50	50%

a. -20%

b. 20%

c. 30%

d. 35%

e. 70%