Practice Problem 20 on p. 118 and Answer on p. 123
Can somebody explain the answer? I do not think it is correct.
Better if you post the question here, it would be easier to respond to it then.
The question:
Which of the following index weighting methods requires the most frequent rebalancing?
A. Price weighting.
B. Equal weighting.
C. Market-capitalization weighting.
Answer in the book:
B is correct. Changing market prices will cause weights that were initially equal to become unequal, thus requiring rebalancing.
I do not understand, how to adjust the weight of 1/N.
OK. I understand it now.
“Equal weighting” means “Equal amount of money in each equity”.