If a price weighted average experiences a stock split, its divisor will
A) increase.
B) there is no divisor for this method.
C) be unaffected.
D) decrease.

Question

Quizplus · Accepted Answer

If a stock split occurs, the price of the stock will decrease, leading to a decrease in the value of the price weighted average. To maintain continuity in the index level, the divisor must be adjusted to offset the decrease in the stock price. Therefore, the divisor will decrease.

If a Price Weighted Average Experiences a Stock Split, Its