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The following three defense stocks are to be combined into a stock index in January...

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Finance

The following three defense stocks are to be combined into a stock index in January 2016 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance):

Price
Shares (millions) 1/1/16 1/1/17 1/1/18
Douglas McDonnell 190 $ 105 $ 111 $ 124
Dynamics General 450 68 64 78
International Rockwell 330 97 86 102

a. Calculate the initial value of the index if a price-weighting scheme is used.

b. What is the rate of return on this index for the year ending December 31, 2016? For the year ending December 31, 2017? (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.)

2016 return %
2017 return %

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