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2. Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C

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2. Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two for one in the last period. Po P1 95 90 50 100 Qo 100 200 200 Q11 100 200 200 P2 95 45 55 Q2 100 200 400 45 110 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1). b. What must happen to the divisor for the price-weighted index in year 2 (after the split of stock c)? c. What will be the divisor from periods 3 onwards if no splits are expected? d. Calculate the rate of return for the second period (t = 1 tot = 2). e. Calculate the first-period rates of return on a market value-weighted index. f. Calculate the first-period rates of return on an equally-value-weighted index

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