[NoExcel]Therearetwostocks,AandB,withthefollowinginformation:

	Stock A		Stock B
	Price (PA,t)	Share Outstanding	Price (PB,t)	Share Outstanding
t=0	60	750	40	1000
t=1	80	750	60	1000

1. (a) Suppose the initial divisor is 1, construct a price-weighted index using the two stocks. What are the index level I0, and I1 at time 0 and 1, respectively, and the return from t=0 to t=1?

2. (b) When there was a 2-for-1 stock split for stock A at t=1, what is D1? Does the index level change?

3. (c) If you have $200, how would you construct a portfolio that mimics the price-weighted index? What is the

   return of your investment? (no split)

4. (d) Suppose that I0 = 100, construct a value-weighted index using the two stocks and compute its return (no

   split)