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.
P_{0} | Q_{0} | P_{1} | Q_{1} | P_{2} | Q_{2} | |
A | 86 | 100 | 91 | 100 | 91 | 100 |
B | 46 | 200 | 41 | 200 | 41 | 200 |
C | 92 | 200 | 102 | 200 | 51 | 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). (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
Rate of return
%
b. What will be the divisor for the
price-weighted index in year 2? (Do not round intermediate
calculations. Round your answer to 2 decimal
places.)
Divisor
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