Assume the number of shares issued by each company remains unchanged between times 1, 2 and 3

Stock   P1        P2        P3        Number of shares outstanding         

A          $20      $25      $22                  50,000

B          $100    $102    $105                10,000

C          $50      $51      $ 50                 20,000

a. Calculate the values of both the price-weighted index and of the market capitalization-weighted index at times 1, 2 and 3. What is the rate of growth (return) of both indexes between each period? Assume that time 1 is your base period, i.e. when each index is first constructed.

b. Assume now that company B splits its stock price in two at the end of time 2. Calculate the new divisor used for the price-weighted index.