22 3. Consider the three stocks in the following table. Pe represents price at time...
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22 3. Consider the three stocks in the following table. Pe represents price at time t, and Qrepresents shares outstanding at time t. P. P1 Q1 P2 A 85 200 95 200 100 200 B 40 500 50 (2-for-1 splits) 500 25 1,000 70 300 80 300 90 300 a. Calculate the rate of return on a market value-weighted index of the three stocks for the first period (E=0 to t=1). (3 points) b. What happens to the divisor for the price-weighted index in year 1? Calculate the price-weighted index of the three stocks for t=0, 1 and 1-2. (6 points) c. Calculate the rate of return on an equally-weighted index of the three stocks for the second period (E=1 tot-2). (3 points)
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