11. Consider the three stocks in the following table. P, repre- sents price at time t,...

 

 

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11. Consider the three stocks in the following table. P, repre- sents price at time t, and Q, represents shares outstanding at time t. Stock C splits two for one in the last period. Po Q0 P Q1 P Q2 A 90 100 95 100 95 100 B 50 200 45 200 45 200 C 100 200 110 200 55 400 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1). b. What must happen to the divisor for the price- weighted index in year 2? c. Calculate the price-weighted index for the second period (t1 tot = 2). 11. Consider the three stocks in the following table. P, repre- sents price at time t, and Q, represents shares outstanding at time t. Stock C splits two for one in the last period. Po Q0 P Q1 P Q2 A 90 100 95 100 95 100 B 50 200 45 200 45 200 C 100 200 110 200 55 400 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1). b. What must happen to the divisor for the price- weighted index in year 2? c. Calculate the price-weighted index for the second period (t1 tot = 2).

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To calculate the rate of return on a priceweighted index we need to determine the total price of the ... View the full answer