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). Assume the index is scaled by a factor of 10 million; that is, if the total value of all firms in the market is $5 billion, the index would be quoted as 500.

	Shares (Millions)	1/1/13	1/1/14	1/1/15
Douglas McDonnell	180	$60	$64	$77
Dynamics General	325	$68	$74	$78
International Rockwell	370	$97	$86	$100

a. Calculate the initial value of the index if a value-weighting scheme is used.

b. What is the rate of return on this index for the year ending December 31, 2013? For the year ending December 31, 2014?