Looking for the answer to the question below related to Financial Management ?
The Dow Jones Industrial Average (DJIA) contains _________ of the largest and most influential companies (blue chip companies) is the US__________
The Correct Answer Is:
- D. 30
The Dow Jones Industrial Average (DJIA), often referred to as the Dow, is one of the most widely recognized and cited stock market indices in the world. It is designed to measure the performance of the stock prices of 30 of the largest and most influential publicly traded companies in the United States.
The correct answer to the question is option D, which states that the DJIA contains 30 of these blue-chip companies. In this explanation, we will delve into why this answer is correct and why the other options (A, B, and C) are not.
Why Option D (30) is Correct:
The DJIA is composed of 30 major American companies that are considered blue-chip stocks. These companies are leaders in their respective industries and are recognized for their stability and reliability.
The index was created by Charles Dow in 1896, and it was initially composed of only 12 companies. Over time, the composition of the index has evolved to include 30 companies, which are collectively referred to as “industrial” because they are meant to represent a broad cross-section of the U.S. economy.
The number 30 is a historical and fundamental characteristic of the DJIA. It has remained constant at 30 companies for many years. This stability allows for historical comparisons and is a key reason for its continued popularity.
The Dow includes companies from various sectors, such as technology, finance, healthcare, and consumer goods, to provide a comprehensive snapshot of the U.S. stock market’s performance.
The 30 companies in the DJIA are not static and may change over time. When a company’s performance declines or it is no longer considered a significant player in its industry, it may be replaced by another company. These changes are made to ensure that the DJIA continues to accurately reflect the U.S. stock market’s performance.
In summary, Option D (30) is correct because the DJIA is currently composed of 30 of the largest and most influential blue-chip companies in the United States, and this number has remained constant for a substantial period.
Why Options A, B, and C are Incorrect:
A. Option A (35):
The DJIA is not composed of 35 companies but rather 30. The number 35 is not historically or currently associated with the composition of the DJIA. Choosing this option is factually incorrect.
B. Option B (25):
The DJIA is not composed of 25 companies either. The number 25 is not associated with the Dow’s composition at any point in its history. This choice is factually incorrect.
C. Option C (40):
Similarly, the DJIA is not composed of 40 companies. The number 40 is not relevant to the composition of the Dow. Selecting this option is factually incorrect.
In conclusion, the Dow Jones Industrial Average (DJIA) is a stock market index consisting of 30 of the largest and most influential publicly traded companies in the United States. These companies are considered blue-chip stocks and are chosen to represent a broad cross-section of the U.S. economy.
Option D (30) is the correct answer because it accurately reflects the number of companies in the DJIA, which has been consistent for many years. Options A, B, and C are incorrect because they do not correspond to the actual composition of the DJIA, and their associated numbers (35, 25, and 40) have no historical or factual relevance to the index’s structure.
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