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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