When Stocks Are Held in an Index in Proportion to Their

question 52

Multiple Choice

When stocks are held in an index in proportion to their total company market value, the index is:

• A)dollar-weighted.
• B)front-weighted.
• C)back-weighted.
• D)price-weighted.
• E)value-weighted.

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Definitions:

Fair Value Increments

Increases in the value of an asset or security that result from a reassessment of its fair value, often reflected in financial statements to show current market conditions.

Deferred Tax Liability

A tax obligation that a company owes and will pay in the future, resulting from timing differences between the recognition of income and expenses for financial reporting and tax purposes.

Temporary Differences

Arise when there is a discrepancy between the book value of an asset or liability and its tax value, impacting the timing of when income and expenses are recognized.

Fair Values

A financial term describing the estimated market value of an asset or liability based on current prices in an orderly transaction between market participants.