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Problem 5-18 Equally Weighted Indexes (LO4, CFA2) In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value

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Problem 5-18 Equally Weighted Indexes (LO4, CFA2) In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value is comput from the average rate of return of the stocks comprising the index. Equally weighted indexes are frequently used by financial researchers to measure portfolio performance. 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//8 195 455 230 s 97 27 56 $113 36 62 $100 Douglas McDonne11 Dynanics General International Rockwe11 45 a. Compute the rate of return on an equally weighted index of the three defense stocks for the year ending December 31, 2016. (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Index return

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