Question
Consider the three stocks in the following table. P(t) represents price at time t, and Q(t)...
Consider the three stocks in the following table. P(t) represents price at time t, and Q(t) represents shares outstanding at time t. Stock C splits two-for-one in the last period.
a.) What is the new divisor for the price-weighted index that is formed using Stocks A, B, and C if the starting divisor is 3?
b.)What is the rate of return for the price-weighted index that is formed using Stocks A, B, and C from time period 1 to time period 2?
| P(1) | Q(1) | P(2) | Q(2) | |
| A | 95 | 100 | 95 | 100 |
| B | 45 | 200 | 45 | 200 |
| C | 100 | 200 | 50 | 400 |
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Answer #1
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