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

4. 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. P0 Q0 P1 Q1 P2 Q2 A 85 150 90 150 90 150 B 40 600 35 600 35 600 C 70 100 80 100 40 200 ________________________________________ Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1). (5 points) b. What must happen to the divisor for the price-weighted index in year 2? (10 points) c. Calculate the rate of return of the price-weighted index for the second period (t = 1 to t = 2). (5 points)

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