Consider the three stocks in the following table. Pt represents price at time t, and Qt represents

Question:

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).
b. What must happen to the divisor for the price-weighted index in year 2?
c. Calculate the rate of return for the second period (t = 1 to t =2).

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...