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. (LO 2-2) A B C Po 90 50 100 Qo 100 200 200 P 95 45 110 Q 100 200 200 P 95 45 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 of the price-weighted index for the second period (t = 1 to t=2). Q 100 200 400

Consider the three stocks in the following table. Pf represents price at time t, and Qf represents shares outstanding at time t Stock C splits two-for-one in the last period. (LO 2-2) 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 of the price-weighted index for the second period ( t=1 to t=2)