Question

Use the following information to answer the next three questions.

	Price
	Shares (millions)	1/1/13	1/1/14	1/1/15
Douglas McDonnell	200	$70	$73	$87
Dynamics General	300	51	46	60
International Rockwell	390	80	69	86

Find the rate of return for an equally weighted index from 2014-2015.

i) 0.2394

ii) 0.2464

iii) 0.2475

iv) 0.2671

Answer 1

Rate of return for Douglas Mcdonnel = 87/73 - 1

Rate of return for Douglas Mcdonnel = 19.18%

Rate of return for Dynamics General = 60/46 - 1

Rate of return for Dynamics General = 30.43%

Rate of return for International Rockwell = 86/69 - 1

Rate of return for International Rockwell = 24.64%

Rate of Return for Equally weighted portfolio = (19.18% + 30.43% + 24.64%)/ 3

Rate of Return for Equally weighted portfolio = (74.25%)/ 3

Rate of Return for Equally weighted portfolio = 0.2475 or 24.75%

Option 3rd is correct