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Weighted Stock Index
Categories: Finance,
In weighted stock indexes, price changes in some stocks have a much greater impact than price changes in others in computing the direction of the overall index. By contrast, in an unweighted index, prices changes in all the stocks have an equal impact.A price weighted index, such as the dow jones industrial average (DJIA), is affected more by the changing prices of higher-priced securities than by changes in the prices of lower-priced securities. Similarly, a market capitalization weighted index, such as the nasdaq composite index, gives more weight to price changes in securities with the highest market values, calculated by multiplying the current price per share by the number of outstanding or floating shares. A capitalization weighted index may also be called a market value weighted index. The theory behind weighting is that price changes in the largest or most expensive securities have a greater impact on the overall economy than price changes in smaller-cap or less expensive stocks. However, some critics argue that strong market performance by the biggest or most expensive stocks can drive an index up, masking stagnant or even declining prices in large segments of the market, and providing a skewed view of the economy.
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Definition / Meaning of
Floating Rate
Categories: Credit and Debt,
A debt security or corporate preferred stock whose interest rate is adjusted periodically to reflect changing money market rates is known as a floating rate instrument. These securities, for example, five-year notes, are initially offered with an interest rate that is slightly below the rate being paid on comparable fixed-rate securities. But because the rate is adjusted upward from time to time, its market price generally remains very close to the offering price, or par.When a nation's currency moves up and down in value against the currency of another nation, the relationship between the two is described as a floating exchange rate. For example, the us dollar is worth more japanese yen in some periods and less in others. That movement is usually the result of what's happening in the economy of each of the nations and in the economies of their trading partners. A fixed exchange rate, on the other hand, means that two (or more) currencies, such as the us dollar and the Bermuda dollar, always have the same relative value.
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