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Consider the three stocks in the following table. P_1 represents price at time t, and Q_1 represents shares outstanding at time Stock C splits two-for-one

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Consider the three stocks in the following table. P_1 represents price at time t, and Q_1 represents shares outstanding at time Stock C splits two-for-one in the last period. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t= 0 to t= 1). What must happen to the divisor for the price-weighted index in year 2? Calculate the rate of return of the price-weighted index for the second period (t = 1 to t = 2). Using the data in the previous problem, calculate the first-period rates of return on the following indexes of the three stocks: A market value-weighted index An equally weighted index

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