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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

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 350 $ 65 $ 69 $ 81
Dynamics General 450 25 19 33
International Rockwell 210 54 43 57

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, 2016? For the year ending December 31, 2017? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

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