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

Question

The following three defense stocks are to be combined into a stock index in January 2013 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance):

What is the rate of return on this index for the year ending December 31, 2013? For the year ending December 31, 2014? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

The following three defense stocks are to be combined into a stock index in January 2013 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance):

Explanation / Answer

a.) Initial value of the index (2013) = ( 94+36+65) / 3

= 65

b.) Price-weighed indiex (2013) = 65

Price-weighed indiex (2014) = (97+31+54) / 3 = 60.667

Price-weighed indiex (2015) = (111+45+68) / 3 = 74.667

Rate of return (2013) = (60.667 - 65) / 65

= -6.66%

Rate of return (2014) = (74.667 - 60.667) / 60.667

= 23.07%

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.