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The following three defense stocks are to be combined into a stock index in January 2013 (perhaps a portfolio manager believes these stocks are an
The following three defense stocks are to be combined into a stock index in January 2013 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): |
Price | ||||||||||
Shares (millions) | 1/1/13 | 1/1/14 | 1/1/15 | |||||||
Douglas McDonnell | 340 | $ | 103 | $ | 106 | $ | 118 | |||
Dynamics General | 450 | 45 | 39 | 53 | ||||||
International Rockwell | 410 | 74 | 63 | 79 | ||||||
a. | Calculate the initial value of the index if a price-weighting scheme is used. |
Index value |
b. | What is the rate of return on this index for the year ending December 31, 2013? For the year ending December 31, 2014? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
2013 return | % | |
2014 return | % | |
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