Question 1

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	97	100	102	100	102
B	57	200	52	200	52
C	114	200	124	200	62

Required:

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 bethe 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 tot= 2).