Question
Use the following information regarding an equal-weighted equity index and assume that all dividend payments are made at the end of the year and are
Use the following information regarding an equal-weighted equity index and assume that all dividend payments are made at the end of the year and are reinvested in the stock that paid the dividend.
Price at the end of 2021:
Security A = $25
Security B = $50
Security C = $31.25
Security D = $100
Price at the end of 2022:
Security A = $26
Security B = $45
Security C = $36
Security D = $135
Dividends per share:
Security A = $0.5
Security B = $0.2
Security C = $0.4
Security D = $0.5
The dollar value of the index on December 31, 2021 is $10,000 and using a divisor of 100, the index level equals 100.
The weight of Security B in the index on December 31, 2022 with dividends reinvested and before rebalancing is closest to:
a. 16.75% d. 22.16%
b. 18.55% e. 23.33%
c. 19.24% f. 25.00%
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