CFA Level I · CFA Level I Exam · Benchmarking Returns
Three shares make up a price-weighted index. Prices are 30, 40 and 80 at the start and 36, 38 and 82 at the end. The index return over the period is closest to:
The price-weighted index return is the change in the sum of prices divided by the starting sum. The prices rise from 150 to 156, giving 4.0%.
- A3.0%
- B4.7%Correct
- C5.0%
Explanation
Start sum = 30+40+80 = 150. End sum = 36+38+82 = 156. Return = 156/150 − 1 = 4.0%. Check: weighted returns: (30×20% + 40×(−5%) + 80×2.5%)/150 = (6−2+2)/150 = 4.0%. None of the options equals 4.0%, so this item is invalid as written.
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