Calculate the initial value of index-value-weighting scheme

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The following three defense stocks are to be combined into a stock index in January 2013 (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.

Calculate the initial value of the index if a value-weighting scheme is used.

What is the rate of return on this index for the year ending December 31, 2013? For the year ending December 31, 2014?

Reference no: EM13850394

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