In 2001, a couple of new indices were set up. They were both based on the same pool of securities, and the weightings and selection of securities has remained constant. The divisor was also the same for both indices at inception. The only difference is that one index is a price index and the other is a total return index. Which is likely to have the highest price today? Price index Total return index Both will have the same price

The difference between a price index and a total return index is that the total return index includes reinvestment of all cash flows, whereas the price index just includes price changes of securities. The total return index then will be higher.

wait a minute...can i change my answer? lol i vote C

Question Of The Week - Equity (7) - CFA Level 1

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This topic has 2 replies, 2 voices, and was last updated Feb-189:54 pm by AdaptPrep.

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- AdaptPrep
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  24 Feb 2018 at 9:54 pm
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  The difference between a price index and a total return
  index is that the total return index includes reinvestment of all cash flows,
  whereas the price index just includes price changes of securities. The total return index then will be higher.
- simply_complex2
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  - CFA Level 1
  21 Feb 2018 at 9:11 am
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  wait a minute…can i change my answer? lol i vote C
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