A Price-Weighted Index Consists of Stocks A, B, and C

question 54

Multiple Choice

A price-weighted index consists of Stocks A, B, and C which are priced at $50, $35, and $15 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if Stock A undergoes a 5-for-1 stock split?

• A).40
• B).65
• C)1.00
• D)1.65
• E)1.85

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Definitions:

BFOQ

Stands for "Bona Fide Occupational Qualification," a legal term that allows for the consideration of characteristics normally deemed discriminatory if they are essential to a job's operation.

Mutual Mistake

A contract law term where all parties involved have a mistaken understanding about a crucial aspect of the agreement.

Basic Assumption

A fundamental belief or principle that is accepted as true without need for proof, underlying the basis of an argument or theory.

Material Effect

An impact significant enough to influence a decision, outcome, or valuation, often used in legal and financial contexts.