Given $100,000 to invest, construct a value-weighted portfolioof the four stocks

Question

Given $100,000 to invest, construct a value-weighted portfolioof the four stocks listed below: Stock Price/ Share ($) Number of Shares
Outstanding
(millions) Golden Seas 13 1000 Jacobs & Jacobs 22 1.25 MAG 43 30 PDJB 5 10
Given $100,000 to invest, construct a value-weighted portfolioof the four stocks listed below: Stock Price/ Share ($) Number of Shares
Outstanding
(millions) Golden Seas 13 1000 Jacobs & Jacobs 22 1.25 MAG 43 30 PDJB 5 10 Stock Price/ Share ($) Number of Shares
Outstanding
(millions) Golden Seas 13 1000 Jacobs & Jacobs 22 1.25 MAG 43 30 PDJB 5 10 Stock Price/ Share ($) Number of Shares
Outstanding
(millions) Golden Seas 13 1000 Jacobs & Jacobs 22 1.25 MAG 43 30 PDJB 5 10

Explanation / Answer

Value-weighted portfolio  means we need to purchase an equal percentage of eachcompany’s market capitalization.

• The market capitalization of the Goldenseas is 1000*13 = 1300
market capitalization of Jacobs &Jacobs is1.25*22=27.5
market capitalization of MAG is 30*43=1290
market capitalization of PDJB is 10*5=50
.
• If x is the equal percentage of each company’smarket capitalization that we’ll invest in, then1300*x+27.5*x+1290*x+50*x=100000
          2667.5*x=100000
          x=1000000/26675

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