Explanation:

To determine the index's value at the end of Period 3, the returns must be compounded over the three periods. The correct calculation is as follows:

1. Period 1: $100 \times (1 + 12\%) = 112$
2. Period 2: $112 \times (1 - 8\%) = 103.04$
3. Period 3: $103.04 \times (1 + 2\%) \approx 105.10$

The closest value to 105.10 is 105, which corresponds to option B.

• Option A (103) is incorrect because it represents the value at the end of Period 2, not Period 3.
• Option C (106) is incorrect because it assumes the returns are added rather than compounded, leading to an inaccurate result.