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Suppose the following four stocks are to be combined into a stock index in January 2022 (perhaps a portfolio manager believes these stocks are an
Suppose the following four stocks are to be combined into a stock index in January 2022 (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, 2022? For the year ending December 31, 2023 ? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. b. Now assume that a value-weighted 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 . Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places
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