Question

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

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.

P0 Q0 P1 Q1 P2 Q2
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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