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My question is on (C)...Below in bold is my professor answer. but if someone could explain it in more detail it would be much appreciated.
My question is on (C)...Below in bold is my professor answer. but if someone could explain it in more detail it would be much appreciated.
The rate of return is zero. The value of the index remains unchanged since the retrun on each stock separetly equals zero.
19. Consider the three stocks in the following table. P, represents price at time t, and Q, represents shares outstanding at time t. Stock C splits two-for-One in the last period. (LO 2-2) Q1 100 200 200 0 2 90 50 100 100 200 200 95 45 110 100 200 400 95 45 a. Calculate the rate of return on a priceweighted index of the three stocks for the first period (0 to 1). b. What must happen to the divisor for the price-weighted index in year 2? c. Calculate the rate of return of the price-weighted index for the second period (t 1 toStep by Step Solution
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