Asked by ANGELITA BROOKS on May 12, 2024
Verified
Which of the following is true of the Dow Jones Industrial Average?
A) It is a value-weighted average of 30 large industrial stocks.
B) It is a price-weighted average of 30 large industrial stocks.
C) The divisor must be adjusted for stock splits.
D) It is a value-weighted average of 30 large industrial stocks, and the divisor must be adjusted for stock splits.
E) It is a price-weighted average of 30 large industrial stocks, and the divisor must be adjusted for stock splits.
Dow Jones Industrial Average
An index that represents the stock performance of 30 large, publicly-owned companies based in the United States.
Price-Weighted
A stock market index calculation method where stocks are weighted according to their price per share, rather than their total market capitalization.
Divisor
A numeric factor used in calculations to adjust stock indexes, reflecting changes in the composition of the index without affecting its overall value.
- Familiarize yourself with the procedures and corrections applicable to leading stock indices.
Verified Answer
NH
Noubahar HasnainMay 14, 2024
Final Answer :
E
Explanation :
The Dow Jones Industrial Average (DJIA) is indeed a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. The divisor, known as the Dow Divisor, is adjusted to account for stock splits, dividends, or structural changes to maintain the index's continuity.
Learning Objectives
- Familiarize yourself with the procedures and corrections applicable to leading stock indices.