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

Question

You are considering how to invest part of your retirement savings.You have decided to put $400,000 into three stocks: 52% of the money in Gold Finger (currently $25/share), 9% of the money in Moosehead (currently $98/share), and the remainder in Venture Associates (currently $9/share). Suppose GoldFinger stock goes up to $30/share, Moosehead stock drops to $62/share, and Venture Associates stock drops to $5 per share. a. What is the new value of the portfolio? b. What return did the portfolio earn? c. If you don't buy or sell any shares after the price change, what are your new portfolio weights? a. What is the new value of the portfolio? The new value of the portfolio is $.. (Round to the nearest dollar) b. What return did the portfolio earn? The portfolio earned a return of 1%. (Round to two decimal places.) c. If you don't buy or sell any shares after the price change, what are your new portfolio weights? The weight of Goldfinger is now )%. (Round to two decimal places.) The weight of Moosehead is now %. (Round to two decimal places.) The weight of Venture is now 196, (Round to two decimal places.)

Explanation / Answer

Answer A: Money invested in different stocks:

52% of 400000 = 208000, shares bought of goldfinger : 208000/25 = 8320

9% of 400000 =36000, shares bought of Moosehead : 36000/98 = 367.34

39% of 400000 =156000, share bought of venture associates 156000/9 = 17333.33

Currently share values of all three stocks

Goldfinger : $30/share, mulitply this with no of shares to get new value of goldfinger $249600

Similarly Moosehead and venture associates :

Moosehead :62*367.34 = $22775.51

Venture associates : 5 *17333.33 = $86666.67

New value of portfolio : $359042.2

Answer B : return on the portfolio :

(359042.2 -400000)/400000 = -0.10239 or -10.23%

New portfolio weights:

Golden finger : value of goldfinger/ total portfolio new value = 249600/359042.2 = 69.51%

Similarly Moosehead = 22775.51/359042.2 = 6.34%

venture associates = 86666.67/359042.2 = 24.13%

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