Question: Problem 3 (7 points) Consider the three stocks in the following table. Pe represents price at time t, and Qt represents shares outstanding at time
Problem 3 (7 points) Consider the three stocks in the following table. Pe represents price at time t, and Qt represents shares outstanding at time t. Stock Omega splits two for one in the last period (at the end of the day 1, before open on day 2). Po Qo P1 Q1 P2 Alpha 88 100 94 100 96 100 Gamma 48 200 46 200 45 200 Omega 102 200 110 200 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 (t=1 to t=2)
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