Question
Consider the three stocks in the following table. P t represents price at time t , and Q t represents shares outstanding at time t.
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 | 75 | 375 | 80 | 375 | 80 | 375 |
B | 95 | 850 | 90 | 850 | 90 | 850 |
C | 55 | 1,050 | 60 | 1,050 | 30 | 2,100 |
a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Calculate the new divisor for the price-weighted index in year 2. (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Calculate the rate of return for the second period (t = 1 to t = 2). (Round your answer to 2 decimal places.)
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