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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): Suppose that Douglas McDonnell shareholders approve a 2-for-1 stock split on January 1, 2017.

Price
Shares (millions) 1/1/16 1/1/17 1/1/18
Douglas McDonnell 200 $ 70 $ 73 $ 87
Dynamics General 300 51 46 60
International Rockwell 390 80 69 86

a. What is the new divisor for the index? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

b. Calculate the rate of return on the index for the year ending December 31, 2017, if Douglas McDonnells share price on January 1, 2018, is $26.40 per share. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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