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 90 100 95 100 95 100

B 50 200 45 200 45 200

C 100 200 110 200 55 400

a. Calculate the rate of return on a price-weighted index of the three stocks for the first period ( t 5 0 to t 5 1).

b. What must happen to the divisor for the price-weighted index in year 2?

c. Calculate the rate of return for the second period ( t 5 1 to t 5 2).