Consider the three stocks in the following table. Pt represents price at time t, and represents shares outstanding at time t. Stock C splits two for one in the last period. A B с P₁ Q1 80 85 250 250 30 800 25 800 65 800 80 Po Rate of return P₂ New divisor 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.) 85 25 800 40 1,600 Rate of return Q₂ % 250 800 b. Calculate the new divisor for the price-weighted index in year 2. (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Calculate the rate of return for the second period (t=1 to t=2). (Round your answer to 2 decimal places.) %
Consider the three stocks in the following table. Pt represents price at time t, and represents shares outstanding at time t. Stock C splits two for one in the last period. A B с P₁ Q1 80 85 250 250 30 800 25 800 65 800 80 Po Rate of return P₂ New divisor 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.) 85 25 800 40 1,600 Rate of return Q₂ % 250 800 b. Calculate the new divisor for the price-weighted index in year 2. (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Calculate the rate of return for the second period (t=1 to t=2). (Round your answer to 2 decimal places.) %
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 5.2IP
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Transcribed Image Text:Consider the three stocks in the following table. P represents price at time t, and represents shares outstanding at time t. Stock C
splits two for one in the last period.
A
B
с
P
20
250
80
P₁ 21
85 250
25
85
30 800
800 25
65 800 80 800 40
Rate of return
P2
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.)
New divisor
%
Rate of return
Q2
b. Calculate the new divisor for the price-weighted index in year 2. (Do not round intermediate calculations. Round your answer to 2
decimal places.)
250
800
1,600
c. Calculate the rate of return for the second period (t=1 to t= 2). (Round your answer to 2 decimal places.)
%
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