nterpret a Laspeyres price index of 116.67.    A.  Holding quantity constant in the base year, the price of wine increased by 4.23%.    B.  Holding quantity constant in the current year, the price of wine decreased by 23.12%.    C.  Holding quantity constant in the current year, the price of wine decreased by 13.94%.    D.  Holding quantity constant in the base year, the price of wine increased by 16.67%.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

Interpret a Laspeyres price index of 116.67.

 
    •  A. 

Holding quantity constant in the base year, the price of wine increased by 4.23%.

    •  
    •  B. 

Holding quantity constant in the current year, the price of wine decreased by 23.12%.

    •  
    •  C. 

Holding quantity constant in the current year, the price of wine decreased by 13.94%.

    •  
    •  D. 

Holding quantity constant in the base year, the price of wine increased by 16.67%.

Expert Solution
Step 1

Laspeyres price index- This price index is used to measure the change in the price of basket of goods in the current year  relative to the base year period and it is given by the formula:

Laspeyres price index=(Price at observation period x Base Quantity)(Base Price x Base Quantity)

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Risk Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education