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  3. consider the three stocks in the following table.

Consider the three stocks in the following table. Stock price and shares outstanding information are...

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Finance

Consider the three stocks in the following table. Stock price and shares outstanding information are listed in the table. (Keep two decimal places for your final answers, e.g., 6.88%)

Stock

Price

at t=0

Price

at t=1

Shares

(million)

A

$40

$70

10

B

$80

$60

2

C

$30

$20

3

(1) Assume there is no stock split. Calculate the rate of return on a value-weighted index containing the three stocks for the period (i.e., from t=0 to t=1)

(2) Assume stock B splits four-for-one at the initial time point (t=0). Calculate the rate of return on a price-weighted index containing the three stocks for the period (i.e., from t=0 to t=1)

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