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The following three defense stocks are to be combined into a stock index in January 2010 (perhaps a portfolio manager believes these stocks are an
The following three defense stocks are to be combined into a stock index in January 2010 (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 average firm's market value is $5 billion, the index would be quoted as 500. a. Calculate the initial value of the index if a value-weighting scheme is used. Index value b. What is the rate of return on this index for the year ending December 31, 2010? For the year ending December 31, 2011? (Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "%" sign in your response.)
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