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The following three defense stocks are to be combined into a stock index in January 2019 (perhaps a portfolio manager believes these stocks are an

The following three defense 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). Assume the index is scaled by a factor of 10 million; that is, if the total value of all firms in the market is $5 billion, the index would be quoted as 500. Price Shares (millions) 1/1/19 1/1/20 1/1/21 Douglas McDonnell 195 $ 97 $ 100 $ 113 Dynamics General 455 27 22 36 International Rockwell 230 56 45 62 a. Calculate the initial value of the index if a value-weighting scheme is used. (Round your answer to 2 decimal places.) b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020?

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