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The following three defense stocks are to be combined into a price-weighted stock index in January 2016 (perhaps a portfolio manager believes these stocks are
The following three defense stocks are to be combined into a price-weighted stock index in January 2016 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): Suppose that Douglas McDonnell shareholders approve a 3-for-1 stock split on January 1, 2017 and that the company enacts the stock split on January 2, 2017. Price Douglas McDonnell Dynamics General International Rockwell Shares (millions) 430 535 210 1/1/16 $108 38 67 1/1/17 $114 34 56 1/1/18 $41.08 48 70 a. What is the new divisor for the index? (Do not round intermediate calculations. Round your answer to 2 decimal places.) New Divisor: b. Calculate the rate of return on the index for the year of 2017 (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of Return: %
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