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 Shares (millions) 415 2019 return 2020 return 225 350 % % 1/1/19 $ 84 23 52 Price 1/1/20 $ 89 16 41 a. Calculate the initial value of the index if a price-weighting scheme is used. Index value 1/1/21 $106 30 55 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.)
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 Shares (millions) 415 2019 return 2020 return 225 350 % % 1/1/19 $ 84 23 52 Price 1/1/20 $ 89 16 41 a. Calculate the initial value of the index if a price-weighting scheme is used. Index value 1/1/21 $106 30 55 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.)
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):
Douglas McDonnell
Dynamics General
International Rockwell
Index value
2019 return
2020 return
Shares
(millions)
415
225
350
%
1/1/19
$84
23
52
a. Calculate the initial value of the index if a price-weighting scheme is used.
%
Price
1/1/20
$ 89
16
41
1/1/21
$106
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.)
30
55
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