- 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. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0
to t=1).
b. What must happen to the divisor for the price-weighted index in year 2?
