You are considering how to invest part of your retirement savings. You have deci

ID: 2708677 • Letter: Y

Question

You are considering how to invest part of your retirement savings. You have decided to

put $600,000 into three stocks: 61% of the money in GoldFinger (currently $23/share), 21%

of the money in Moosehead (currently $92/share), and the remainder in Venture Associates

(currently $10/share). If GoldFinger stock goes up to $30/share, Moosehead stock drops to

$68/share, and Venture Associates stock rises to $11 per share,

a. What is the new value of the portfolio?

b. What return did the portfolio earn?

c. If you don

a. Number of shares of GoldFinger = 61%*600000/23=15913.04348

Number of shares of Moosehead = 21%*600,000/92=1369.565217

Number of shares of Venture Associates = (1-61%-21%)*600000/10= 10800

new value of the portfolio = 15913.04348*30 + 1369.565217*68 +10800*11=689321.74

b. return did the portfolio earn= (689321.74-600000)/600000= 14.89%

c. weight of Goldfinger is now = 15913.04348*30/689321.74 = 69.26%

weight of Moosehead is now = 1369.565217*68/689321.74= 13.51%

weight of Venture is now = 100%-69.26%-13.51% = 17.23%

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