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The following three defense stocks are to be combined into a stock index in January 2016...

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 415 $ 84 $ 89 $ 106
Dynamics General 225 23 16 30
International Rockwell 350 52 41 55

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.)

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