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. A B C Po 87 47 94 Rate of return Divisor 00 100 200 200 P₁ 92 42 104 Required: 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 % Q1 100 200 200 P2 92 42 52 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.) 92 100 200 400 % c. Calculate the rate of return of the price-weighted index for the second period (t = 1 to t = 2).
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. A B C Po 87 47 94 Rate of return Divisor 00 100 200 200 P₁ 92 42 104 Required: 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 % Q1 100 200 200 P2 92 42 52 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.) 92 100 200 400 % c. Calculate the rate of return of the price-weighted index 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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Transcribed Image Text: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.
ABC
Po
87
47
94
Rate of return
Divisor
00
100
200
200
P1
92
42
104
Required:
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
%
Q1
100
200
200
P2
92
42
52
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.)
Q2
100
200
400
%
c. Calculate the rate of return of the price-weighted index for the second period (t = 1 to t= 2).
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