) THE TYPE OF INDEX THAT WOULD MOST LIKELY HELP BAYSIDE FOUNDATION ACHIEVE OBJECTIVE 1 IS A(N)
3.) The type of index that would most likely help Bayside Foundation achieve Objective 1 is
a(n):
A.
value-weighted index.
B.
price-weighted index.
C.
equal-weighted index.
Answer = A
A value-weighted index is biased toward large, mature companies and minimizes
tracking error. Furthermore, the index is self-rebalancing because the weights
automatically adjust as stock prices change, thus rebalancing costs are minimal.
“Equity Portfolio Management,” by Gary L. Gastineau, Andrew R. Olma, and Robert G.
Zielinski