What Effect Does a Stock Substitution or Stock Split Have

question 42

Multiple Choice

What effect does a stock substitution or stock split have on a price-weighted series?

• A) Index remains the same, divisor will increase/decrease.
• B) Divisor remains the same, index will increase/decrease.
• C) Index and divisor will both remain the same.
• D) Index and divisor will both reflect the changes (immediately).
• E) Not enough information is provided.

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Definitions:

Double Taxation

The imposition of taxes on the same income, asset, or financial transaction at two different levels of government.

Income Tax

A tax imposed by the government on individuals or entities' income, varying according to income level and filing status.

After-Tax Profits

The net income a company retains after all taxes have been deducted from total revenue.

Board of Directors

A group of individuals elected by shareholders to oversee and make strategic decisions for a company.