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Suppose there are only three stocks traded in the stock market: A, B and C. and the information about their stock prices (P) and shares
Suppose there are only three stocks traded in the stock market: A, B and C. and the information about their stock prices (P) and shares outstanding (Q) is listed in the following table: Stock P(t=0) Q (t = 0) P (t = 1) Q(t = 1) A 30 10 35 10 B 20 20 15 20 5 50 6 50 a. (5 points) Calculate the individual stock returns for A, B and C from t = 0 to t = 1. b. (5 points) Calculate the return on the equal-weighted index of the three stocks. c. (5 points) Assume at t = 1 the value-weighted index constructed with the three stocks is 125. What would the value-weighted index be if stock B is split 2 for 1 and stock C 4 for 1 right after t = 1
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