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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