Question

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	87	100	92	100	92	100
B	47	200	42	200	42	200
C	94	200	104	200	52	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

Answer 1