Question

ABC Paper stock was $36per share at the end of last year. Since then, it paid a $1.50 per share dividend in the last year. The stock price is currently $35. Suppose you own 300 shares of ABC Paper. Which of the following statements is (are) correct?(x)Your dollar return on ABC Paper stock was $150 for the year.(y)Your percent return on ABC Paper stock was 1.39 percent for the year.(z)If you had owned more stock then you would have experienced a dollar return greater than $150 but the same percent return.

A.(x), (y) and (z)B.(x) and (y) onlyC.(x) and (z) onlyD.(y) and (z) onlyE.(z) only

You have a portfolio of fivestocks.You invested $5,150 in Intel(INTC), $6,520 in Tenneco(TEN), $10,345 in Alibaba(BABA), $4,370 in Aurora Cannabis (ACB)and $8,435in Occidental Petroleum(OXY). Which of thefollowing statements is (are) correct?(

x)The portfolio weight on the Intel stock is less than 0.146 and the portfolio weight on Occidental Petroleum (OXY) stockismore than 0.243.

(y)The combined portfolio weight of theTenneco and Aurora Cannabis stock is more than 0.308 but less than 0.316

z)If you sold off $1,000 of Alibaba stock and used that $1,000 to purchase Aurora Cannabis stock then the portfolio weight of Alibaba would fall from 0.297 to below 0.269and the portfolio weight of Aurora Cannabis stock would rise above 0.152.

A.(x), (y) and (z) B.(x) and (y) only    C.(x) and (z) only   D.(y) and (z) only E.(y) only

Answer 1

1). Option A - all three statements are correct.

Dollar return per share = ending price + dividend - beginning price = 35 + 1.5 - 36 = 0.50

Total dollar return = 0.50* number of shares = 0.5*300 = 150

%age return = (ending price + dividend - beginning price)/beginning price = 0.50/36 = 1.39%

If number of shares increases, then as can be seen, total dollar returns will increase whereas the %age return will remain the same.

2). Option D - statement (y) and (z) are correct. It can be seen from the following weights table:

			$1,000 is taken from Alibaba & put into Aurora
	Amount ($)	Weight Amount in stock/Total	Amount ($)	Weight Amount in stock/Total
Intel	5,150	0.148	5,150	0.148
Tenneco	6,520	0.187	6,520	0.187
Alibaba	10,345	0.297	9,345	0.268
Aurora Cannabis	4,370	0.126	5,370	0.154
Occidental petroleum	8,435	0.242	8,435	0.242
Total	34,820		34,820