Answer the following questions based on the information above:

a) First, calculate the price weighted indexes at t=0 and t=1. Based on the two number calculate the rate of return for the first period.

b) What must happen to the divisor for the price-weighted index in the second period?

c) Calculate the price-weighted index at t=2. Based on the index number t=1 and t=2, calculate the rate of return for the second period.

11. Consider the three stocks in the following table. P, represents price at time t, and Q, represents shares outstanding at time t. Stock C splits two for one in the last period. Q 90 100 50 100 200 200 95 45 110 200 100 200 400 100 200 55 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? c. Calculate the rate of return for the second period (t = 1 to 1 = 2)