3. Price-Weighted vs. Value-Weighted Indexes (LO4, CFA2) Suppose the following four 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): a. Calculate the initial value of the index if a price-weighting scheme is used. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31,2020 ? b. Now assume that a valueweighted index is used and that it is scaled by a factor of 10 million: that is, if the average firm's market value is $5 billion. the index would be quoted as 500 . 3. Price-Weighted vs. Value-Weighted Indexes (LO4, CFA2) Suppose the following four 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): a. Calculate the initial value of the index if a price-weighting scheme is used. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31,2020 ? b. Now assume that a valueweighted index is used and that it is scaled by a factor of 10 million: that is, if the average firm's market value is $5 billion. the index would be quoted as 500