The following three defense stocks are to be combined into a stock index in January 2019 (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) 1/1/19 1/1/20 1/1/21
Douglas McDonnell 420 $ 63 $ 67 $ 84
Dynamics General 450 53 47 61
International Rockwell 250 82 71 87
a. Calculate the initial value of the index if a value-weighting scheme is used.
