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In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value is computed from the average rate of return of the stocks comprising the index. Equally weighted indexes are frequently used by financial researchers to measure portfolio performance. 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): Douglas McDonnell Dynamics General International Rockwell Index return Shares (millions) Index value 195 455 230 % 1/1/22 $ 97 27 56 Price 1/1/23 a. Compute the rate of return on an equally weighted index of the three defense stocks for the year ending December 31, 2022. Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. $ 100 22 45 1/1/24 $ 113 36 62 b. If the index value is set to 100 on January 1, 2022, what will the index value be on January 1, 2023? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value is computed from the average rate of return of the stocks comprising the index. Equally weighted indexes are frequently used by financial researchers to measure portfolio performance. 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): Douglas McDonnell Dynamics General International Rockwell Index return Shares (millions) Index value 195 455 230 % 1/1/22 $ 97 27 56 Price 1/1/23 a. Compute the rate of return on an equally weighted index of the three defense stocks for the year ending December 31, 2022. Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. $ 100 22 45 1/1/24 $ 113 36 62 b. If the index value is set to 100 on January 1, 2022, what will the index value be on January 1, 2023? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

Essentials Of Investments
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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In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value is computed from the average rate of return of the stocks comprising the index. Equally weighted indexes are frequently used by financial researchers to measure portfolio performance. 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): Douglas McDonnell Dynamics General International Rockwell Shares (millions) Index return 195 455 230 Index value 1/1/22 $ 97 27 56 a. Compute the rate of return on an equally weighted index of the three defense stocks for the year ending December 31, 2022. % Price 1/1/23 $ 100 22 45 Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 1/1/24 $113 36 62 b. If the index value is set to 100 on January 1, 2022, what will the index value be on January 1, 2023? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Transcribed Image Text:In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value is computed from the average rate of return of the stocks comprising the index. Equally weighted indexes are frequently used by financial researchers to measure portfolio performance. 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): Douglas McDonnell Dynamics General International Rockwell Shares (millions) Index return 195 455 230 Index value 1/1/22 $ 97 27 56 a. Compute the rate of return on an equally weighted index of the three defense stocks for the year ending December 31, 2022. % Price 1/1/23 $ 100 22 45 Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 1/1/24 $113 36 62 b. If the index value is set to 100 on January 1, 2022, what will the index value be on January 1, 2023? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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