Reference no: EM13721864
Assume there are only three stocks in the market: A, B, and C. At time 0, P(A) = $10, P(B) = $20, and P(C) = $10. At time 1, P(A) = $15, P(B) = $30, P(C) = $5. The number of shares outstanding is 1 million for A, 2 million for B, and 2 million for C.
a. What are the individual stock returns for A, B, and C from time 0 to time 1?
b. What is the return on a price weighted index of these three stocks?
c. What is the return on a price weighted index of these three stocks?
d. What is the return on an equal weighted index of these three stocks?
e. Why the three indexes give different returns?
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