a. Calculate the initial value of the index if a value-weighting scheme is used. Note: Round your answer to 2 decimal places. Index value b. What is the rate of return on this index for the year ending December 31, 2022? For the year ending December 31, 2023? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The following three defense stocks are to be combined into a stock index in January 2022 (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.
Douglas McDonnell
Dynamics General
International
Rockwell
Index value
Shares (millions)
530
230
330
a. Calculate the initial value of the index if a value-weighting scheme is used.
Note: Round your answer to 2 decimal places.
2022 return
2023 return
1/1/22
$ 62
34
63
Price
1/1/23
$ 66
28
52
%
%
b. What is the rate of return on this index for the year ending December 31, 2022? For the year ending December 31, 2023?
Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your
answers as a percent rounded to 2 decimal places.
1/1/24
$ 81
42
68
Transcribed Image Text:The following three defense stocks are to be combined into a stock index in January 2022 (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. Douglas McDonnell Dynamics General International Rockwell Index value Shares (millions) 530 230 330 a. Calculate the initial value of the index if a value-weighting scheme is used. Note: Round your answer to 2 decimal places. 2022 return 2023 return 1/1/22 $ 62 34 63 Price 1/1/23 $ 66 28 52 % % b. What is the rate of return on this index for the year ending December 31, 2022? For the year ending December 31, 2023? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. 1/1/24 $ 81 42 68
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