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): Douglas McDonnell Dynamics General International Rockwell Index value 67 2019 return 2020 return Shares (millions) 540 455 290 1/1/19 $ 62 49 78 a. Calculate the initial value of the index if a price-weighting scheme is used. -6.47 % 23.94% Price 1/1/20 $ 66 43 67 1/1/21 $ 81 57 81 b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020? 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
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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 appropriate benchmark for his or her performance):
Douglas McDonnell
Dynamics General
International Rockwell
Index value
67
2019 return
2020 return
Shares
(millions)
540
455
290
-6.47 %
23.94 %
1/1/19
$ 62
49
78
a. Calculate the initial value of the index if a price-weighting scheme is used.
Price
1/1/20
$ 66
43
67
1/1/21
$ 81
57
81
b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020? (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.)
Transcribed Image Text: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): Douglas McDonnell Dynamics General International Rockwell Index value 67 2019 return 2020 return Shares (millions) 540 455 290 -6.47 % 23.94 % 1/1/19 $ 62 49 78 a. Calculate the initial value of the index if a price-weighting scheme is used. Price 1/1/20 $ 66 43 67 1/1/21 $ 81 57 81 b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020? (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.)
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