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. Price 1/1/23 1/1/22 $ 303 45 74 Shares (millions) 340 Douglas McDonnell Dynamics General 450 International Rockwell 410 a. Calculate the initial value of the index if a value-weighting scheme is used. Index value $ 106 39 63 1/1/24 $118 53 79 b. What is the rate of return on this index for the year ending December 31, 20227 For the year ending December 31, 20237 Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a rounded to 2 decimal places
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. Price 1/1/23 1/1/22 $ 303 45 74 Shares (millions) 340 Douglas McDonnell Dynamics General 450 International Rockwell 410 a. Calculate the initial value of the index if a value-weighting scheme is used. Index value $ 106 39 63 1/1/24 $118 53 79 b. What is the rate of return on this index for the year ending December 31, 20227 For the year ending December 31, 20237 Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a 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 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
Shares
(millions)
340
1/1/22
$ 303
2022 return
2023 return
Price
1/1/23
$106
450
410
a. Calculate the initial value of the index if a value-weighting scheme is used.
Index value
45
74
1/1/24
$ 118
53
79
39
63
b. What is the rate of return on this index for the year ending December 31, 20227 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.
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