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 с Po 83 43 86 Rate of return Divisor lo 100 200 200 Rate of return P1 88 38 96 2.35 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.) 4.71% 01 100 200 200 P2 88 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.) % 38 48 100 200 400 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 с Po 83 43 86 Rate of return Divisor lo 100 200 200 Rate of return P1 88 38 96 2.35 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.) 4.71% 01 100 200 200 P2 88 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.) % 38 48 100 200 400 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. P+ represents price at time t, and ot represents shares outstanding at time t. Stock C
splits two-for-one in the last period.
A
B
с
Po
83
43
86
Rate of return
Divisor
lo
100
200
200
Rate of return
L
P1
88
38
96
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.)
2.35
4.71%
……....
01
100
200
200
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.)
P₂
88
38
48
%
2₂
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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