CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

An analyst is creating a new stock market index that is not affected by stock splits. The index the analyst is least likely to develop is ______.
A. price-weighted
B. value-weighted
C. unweighted
Explanation: A price-weighted index, such as the Dow Jones Industrial Average, requires adjustment for stock splits. It is computed by summing the prices of individual stocks and dividing by a divisor that is adjusted for stock splits, such that the index value is the same before and after the split.

User Contributed Comments 2

User Comment
merc10112 "LEAST likely to develop"..

am I just reading this wrong or should it be "MOST Likely to develop"?

The answer explanation says the type of index that is not affected by a stock split is a Price-Weighted Index. Is this just wrong?
VMota He is LEAST likely to develop a price-weighted index, because it IS affected by stock splits.
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