Value-weighted indices are biased toward high book value

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Reference no: EM131960643

1. Value-weighted indices are biased toward high book value stocks.

True

False

2. A price-weighted index consists of stocks X, Y, and Z which are priced at $50, $90, and $80 per share, respectively. The current index divisor is 3.2. What will the new index divisor be if stock Z undergoes a 1:2 stock split? Round intermediate steps to four decimals.

4.3636

2.6182

2.5455

4.5091

Reference no: EM131960643

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