Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock Csplits two-for-one in the last period.PO00P101P202A821008710087100B422003720037200C842009420047400Required: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 roundintermediate 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 2decimal places.)Divisorc. Calculate the rate of return of the price-weighted index for the second period (t = 1 to t = 2).

Price weighted index:A price-weighted index is a type of stock market index where the individual…

Consider the three stocks in the following table. Pt represents price at time t splits two-for-one in the last period. PO 00 P1 01 P2 02 A 82 100 87 100 87 100 B 42 200 37 200 37 200 C 84 200 94 200 47 400

Consider the three stocks in the following table. Pt represents price at time t splits two-for-one in the last period. PO 00 P1 01 P2 02 A 82 100 87 100 87 100 B 42 200 37 200 37 200 C 84 200 94 200 47 400

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 13P

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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.
PO
00
P1
01
P2
02
A
82
100
87
100
87
100
B
42
200
37
200
37
200
C
84
200
94
200
47
400
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
%
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
c. Calculate the rate of return of the price-weighted index for the second period (t = 1 to t = 2).

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