The following three defense stocks are to be combined into a stock index in January...
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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). 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
Shares (millions)
1/1/16
1/1/17
1/1/18
Douglas McDonnell
350
$
65
$
69
$
81
Dynamics General
450
25
19
33
International Rockwell
210
54
43
57
a. Calculate the initial value of the index if a value-weighting scheme is used. (Round your answer to 2 decimal places.)
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