In addition to price weighted and value weighted indexes, an equally weighted index is one in which the index value is computed from the average rate of return of the stocks comprising the index Equally weighted indexes are frequently used by financial researchers to measure portfolio performance a...

2016 Douglas McDonnell return 106 103 103 291 Dynamics General return 39 45 45 1333 International ...

In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index

Question:

In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value is computed from the average rate of return of the comprising the index. Equally weighted indexes are frequently used by financial researchers to measure performance.
a. Using the information in Problem 14, compute the rate of return on an equally weighted index of the three defense for the year ending December 31, 2016.
b. If the index value is set to 100 on January 1, 2016, what will the index value be on January 1, 2017? What is the rate of return on the index for 2017?

Data From Problem 14

Suppose 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 $103 $106 $118 340 45 Dynamics General International Rock

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...