Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t.

i) Calculate the rate of return on a market value-weighted index of the three stocks for the first period (t=0 to t=1).

ii) What happens to the divisor for the price-weighted index in year 1? Calculate the price-weighted index of the three stocks for t=0, t=1 and t=2.

iii) Calculate the rate of return on an equally-weighted index of the three stocks for the second period (t=1 to t=2).

PO lo P2 Q2 A 85 200 100 200 PL Q. 95 200 50 (2-for-1 splits) 500 80 300 B 40 500 25 1,000 70 300 90 300