Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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
82
42
84
Rate of return
00
100
Divisor
200
200
P1
87
37
94
01
100
200
200
%
P2
87
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.)
370
47
92
100
200
400
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.)
c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t=2).
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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 Po 82 42 84 Rate of return 00 100 Divisor 200 200 P1 87 37 94 01 100 200 200 % P2 87 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.) 370 47 92 100 200 400 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.) c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t=2).
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