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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). Suppose that Douglas McDonnell shareholders approve a 3-for-1 stock split on January 1, 2020.

Price
Shares (millions) 1/1/19 1/1/20 1/1/21
Douglas McDonnell 415 $ 84 $ 89 $ 106
Dynamics General 225 23 16 30
International Rockwell 350 52 41 55

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, 2020, if Douglas McDonnells share price on January 1, 2021, is $31.08 per share. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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