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.

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 be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Transcribed Image Text:

Po A 83 B 43 с 86 Qo 100 200 200 P1 88 38 96 100 200 200 P₂ 88 38 48 100 200 400 Po A 83 B 43 с 86 Qo 100 200 200 P1 88 38 96 100 200 200 P₂ 88 38 48 100 200 400

Answer rating: 100% (QA)

PRICE WEIGHTED INDEX AT T0 THE VALUE OF INDEX8343863 ATt1 T... View the full answer