In Problem 14, suppose that Douglas McDonnell shareholders approve a 3-for-1 stock split on January 1, 2023. What is the new divisor for the index? Calculate the rate of return on the index for the year ending December 31, 2023, if Douglas McDonnell’s share price on January 1, 2024, is $39.33 per share.

Problem 14

Suppose the following three defense stocks are to be combined into a stock index in January 2022 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for their performance):

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Douglas McDonnell Dynamics General International Rockwell Shares (millions) 340 450 410 1/1/22 $103 45 74 Price 1/1/23 $106 39 63 1/1/24 $118 53 79