Consider the three stocks in the following table. Pt represents price at time t, and 9 represents shares outstanding at time t. Stock C splits two-for-one in the last period.

PO

87

47

94

9g

100

200

200

Pi

92

42

104

01

100

200

200

P2

92

42

52

92

100

200

400

Required:

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.)

Rate of return

b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Divisor

c. Calculate the rate of return of the price-weighted index for the second period (t= 1 to t= 2).