3.Consider the three stocks in the following table. P t represents price at time t, and Q1 represents shares outstanding at time t. Stock C splits two for one in the last period. P0 Q0 P1 Q1 P2 Q2 A 90 100 96 100 95 100 B 50 200 45 200 45 200 C 100 200 110 200 55 400 a.Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0 to t=1). b.What must happen to the divisor for the price-weighted index in year 2? Calculate the rate of return for the second period (t=1 to t=2)
3.Consider the three stocks in the following table. P t represents price at time t, and Q1 represents shares outstanding at time t. Stock C splits two for one in the last period. P0 Q0 P1 Q1 P2 Q2 A 90 100 96 100 95 100 B 50 200 45 200 45 200 C 100 200 110 200 55 400 a.Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0 to t=1). b.What must happen to the divisor for the price-weighted index in year 2? Calculate the rate of return for the second period (t=1 to t=2)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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3.Consider the three stocks in the following table. P t represents price at time t, and Q1 represents shares outstanding at time t. Stock C splits two for one in the last period.
P0 Q0 P1 Q1 P2 Q2
A 90 100 96 100 95 100
B 50 200 45 200 45 200
C 100 200 110 200 55 400
a.Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0 to t=1).
b.What must happen to the divisor for the price-weighted index in year 2?
Calculate the rate of return for the second period (t=1 to t=2)
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