Consider the three stocks in the following table. Pt represents price at time t, and ot represents shares outstanding at tim Stock C splits two-for-one in the last period. A B C PO 87 47 94 20 100 200 200 Rate of return P1 92 42 104 21 100 200 200 % P2 92 42 52 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 roun intermediate calculations. Round your answer to 2 decimal places.) 22 100 200 400

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 10P
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Consider the three stocks in the following table. Pt 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
C
Po
87
47
94
Rate of return
20
100
200
200
Divisor
P1
92
42
104
21
100
%
200
200
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.)
P2
92
42
52
22
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.)
Transcribed Image Text:Consider the three stocks in the following table. Pt 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 C Po 87 47 94 Rate of return 20 100 200 200 Divisor P1 92 42 104 21 100 % 200 200 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.) P2 92 42 52 22 100 200 400 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.)
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