14. Price-Weighted Indexes (LO4, CFA2) Suppose the following three defense stocks are to be combined into a stock index in January 2019 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance):

Price Shares (millions) 1/1/19 1/1/20 1/1/21 Douglas McDonnell 340 $103 $106 $118 Dynamics General 450 45 39 53 International Rockwell 410 74 63 79

a. Calculate the initial value of the index if a price-weighting scheme is used.

b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020?