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A 8 8 points Assume there are only two stocks traded in the stock market, and you are trying to construct an index for stock
A 8 8 points Assume there are only two stocks traded in the stock market, and you are trying to construct an index for stock prices. In the base year the prices were $20 per share for stock 1, with 100 million shares outstanding, and $10 for stock 2 with 50 million shares outstanding. A year later the prices are $30 for stock 1 and $2 for stock 2, respectively. a) Calculate the price-weighted stock price index. b) Calculate the value-weighted stock price index. c) Which of the two methods (price-weighted or value-weighted) more accurately reflects what happened to the total market value between the base year and the current year? Explain your answer. BIUA AIExx, 12pt Y Paragraph f 0 words 300 max
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