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# You are provided with the following information on four shares of stock. Assume that the base year is Dec 2000 and all splits take place on this date....

You are provided with the following information on four shares of stock. Assume that the base year is Dec 2000 and all splits take place on this date. That is after close of trading on December 31, 2000. Stock A and B have a 2 for 1 split at the end of trading on December 31, 2000. Use this information to answer the questions listed below.

A. Dec. 31, 2000: \$ 175.00; Dec. 31, 2001: \$ 50.00
B. Dec. 31, 2000: \$ 50.00; Dec. 31, 2001: \$ 35.00
C. Dec. 31, 2000: \$ 20.00; Dec. 31, 2001: \$ 30.00
D. Dec. 31, 2000: \$ 140.00; Dec. 31, 2001: \$ 130.00

Calculate the rate of return on a price weighted average of the four stocks for the period December 31, 2000 to December 31, 2001. Remember to adjust for changes in the divisor.

SOLUTION:
Stock A:
Return = (Closing Price - Beginning Price) / Beginning Price
Return = ((\$50 * 2) - \$175) / \$175
Return -42.86% Stock B:
Return = ((\$35 * 2) - \$50) / \$50
Return 40.00% Stock C:...

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