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). Suppose that Douglas McDonnell shareholders approve a 2-for-1 stock split on January 1, 2020. Douglas McDonnell Dynamics General International Rockwell New divisor 66.000 Rate of return Shares (millions) 420 450 250 1/1/19 $ 63 % 53 82 Price a. What is the new divisor for the index? (Do not round intermediate calculations. Round your answer to 3 decimal places.) 1/1/20 $ 67 47 71 1/1/21 $84 61 87 b. Calculate the rate of return on the index for the year ending December 31, 2020, if Douglas McDonnell's share price on January 1, 2021, is $24.36 per share. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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). Suppose that Douglas McDonnell shareholders approve a 2-for-1 stock split on January 1, 2020. Douglas McDonnell Dynamics General International Rockwell New divisor 66.000 Rate of return Shares (millions) 420 450 250 1/1/19 $ 63 % 53 82 Price a. What is the new divisor for the index? (Do not round intermediate calculations. Round your answer to 3 decimal places.) 1/1/20 $ 67 47 71 1/1/21 $84 61 87 b. Calculate the rate of return on the index for the year ending December 31, 2020, if Douglas McDonnell's share price on January 1, 2021, is $24.36 per share. (Do not round intermediate calculations. Enter your answer 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
Problem 1PS
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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).
Suppose that Douglas McDonnell shareholders approve a 2-for-1 stock split on January 1, 2020.
Douglas McDonnell
Dynamics General
International Rockwell
New divisor
66.000
Rate of return
Shares
(millions)
420
450
250
1/1/19
$63
53
82
a. What is the new divisor for the index? (Do not round intermediate calculations. Round your answer to
3 decimal places.)
%
Price
1/1/20
$ 67
47
71
1/1/21
$ 84
61
87
b. Calculate the rate of return on the index for the year ending December 31, 2020, if Douglas McDonnell's
share price on January 1, 2021, is $24.36 per share. (Do not round intermediate calculations. Enter your
answer as a percent rounded to 2 decimal places.)
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