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Question: consider the three stocks in the following table pt represents...

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Consider the three stocks in the following table. P(t) represents price at time t, and Q (t) represents share 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

90

100

95

100

95

100

B

50

200

45

200

45

200

C

100

200

110

200

55

400

  1. First, calculate the price weighted indexes at t=0 and t=1. Based on the two numbers calculate the rate of return.

  2. What must happen to the divisor for the price-weighted index in year 2?

  3. Calculate the price weighted index at t=2. Based on the index number at t=1 and t=2, calculate the rate of return.

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