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 90 50 100 Rate of return Divisor 90 100 200 200 P1 95 45 110 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 % 01 100 200 200 P2 95 45 55 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 90 50 100 Rate of return Divisor 90 100 200 200 P1 95 45 110 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 % 01 100 200 200 P2 95 45 55 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.
A
B
C
Ро
90
50
100
Rate of return
Divisor
во
100
200
200
P1
95
45
110
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
%
01
100
200
200
P2
95
45
55
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).
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