Question
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
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 93 100 98 100 98 100
B 53 200 48 200 48 200
C 106 200 116 200 58 400
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. 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.)
c. Calculate the rate of return of the price-weighted index for the second period (t =1 to t = 2)
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