Suppose That Pfizer and Boeing Are Part of the Dow-Jones

question 18

Multiple Choice

Suppose that Pfizer and Boeing are part of the Dow-Jones Industrial Average. If on a given day Boeing closes at $320 and Pfizer at $40

• A) the difference in price will not affect the Average.
• B) the Average will include 8 shares of Pfizer for each share of Boeing.
• C) the effect of each stock on the Average cannot be determined without knowing the number of shares outstanding for each company.
• D) changes in the price of Boeing shares will have 8 times the effect on the Average as changes in the price of Pfizer.

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Definitions:

Merchantable Quality

Freedom of goods from defects that, if known, would impact the price.

Implied Terms

Provisions not expressly stated in a contract but assumed to exist by the nature of the agreement or by law.

Office Building

A structure designed primarily for hosting professional or administrative services and businesses.

Oral Lease

A verbal agreement between a landlord and tenant regarding the rental of property, which may be legally binding but harder to enforce than a written lease.