Passive Equity Investing

CFA Level III
#1

Can some one pls enlighten me how does the weight of each stock is its price per share divided by the sum of all the share prices in the index equals to one share of each constituent security? mathematically

-quote-
The initial benchmark used for the US large-cap allocation is a price-weighted index. In a price-weighted index, the weight of each stock is its price per share divided by the sum of all the share prices in the index. As a result, a price-weighted index can be interpreted as a portfolio composed of one share of each constituent security.
-unquote-

#2

There are 2 stocks and prices

ABC Price = $200 wgt 200/500 = 40%
XYZ price = $300 wgt 300/500 = 60%

I buy a portfolio of shares : 1 share of ABC and 1 share of ZYX It is going to cost be $500

Portfolio value
1 x ABC @ $200 = $200 / $500 = 40%
2 x XYZ @ $300 = $300/ $500 = 60%