A portfolio has 75 shares of Stock A that sell for $43 per share and 115 shares

Question

A portfolio has 75 shares of Stock A that sell for $43 per share and 115 shares of Stock B that sell for $31 per share.

HINT: The portfolio weight is the percent of the portfolio's total value that is invested in Stock A.

0.4750
0.4850
0.4236
0.6011
0.4650

(a) What is the portfolio weight of Stock A?

HINT: The portfolio weight is the percent of the portfolio's total value that is invested in Stock A.

0.4750
0.4850
0.4236
0.6011
0.4650

(b) What is the portfolio weight of Stock B? Hint: Whatever is not invested in Stock A must be invested in Stock B, so the weights must sum to 100%.

0.5250
0.4988
0.5350
0.4884
0.4389

Explanation / Answer

Answer:

a.)

The weight of stock A in the portfolio can be calculated in this way:

For Stock-A

Number of Shares = 75

Price of Share = $43

Therefore, Total Value of share = 75 x $43 = $3225

For Stock-B

Number of Shares = 115

Price of Share = $31

Therefore, Total Value of share = 115 x $31 = $3565

So value of Portfolio = $3225 + $3565 = $6790

So, weight of Stock A in the portfolio = $3225 / $6790 = 0.47496 = 0.475

b.)

Weight of stock B in the portfolio = 1 – 0.475 = 0.525

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