In Problem 14, suppose that Douglas McDonnell shareholders approve a 3-for-1 stock split on January 1, 2017.

Question:

In Problem 14, suppose that Douglas McDonnell shareholders approve a 3-for-1 stock split on January 1, 2017. What is the new divisor for the index? Calculate the rate of return on the index for the year ending December 31, 2017, if Douglas McDonnell€™s share price on January 1, 2018, is $39.33 per share.

Data From Problem 14

Suppose the following three defense stocks are to be combined into a stock index in January 2016 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance):

Price Shares (millions) 1/1/16 1/1/17 1/1/18 Douglas McDonnell $103 $106 $118 340 45 Dynamics General International Rock

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...