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Consider the three stocks in the following table. represents price at time, and represents shares outstanding at time. (Total 25 points) Po lo Q1 P2

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Consider the three stocks in the following table. represents price at time, and represents shares outstanding at time. (Total 25 points) Po lo Q1 P2 Q2 A 85 200 95 200 100 200 B 40 500 50 500 25 1,000 70 300 80 300 90 300 a. Calculate the rate of return on a market value-weighted index of the three stocks for the first period (t=0 to t=1). (5 points) b. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0 to t=1). (5 points) c. What is the divisor for the price-weighted index in year 2? (5 points) d. Calculate the rate of return on a price-weighted index of the three stocks for the second period (t=1 to t=2). (5 points) e. Calculate the rate of return on an equally-weighted index of the three stocks for the second period (t=1 to t=2). (5 points)

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