Question

In: Finance

(A) suppose you construct a new portfolio, initial investment = $18,000 with stocks A at weight...

(A)

suppose you construct a new portfolio,

initial investment = $18,000

with stocks A at weight 0.127138

B at weight 0.364982

C at weight 0.369864

D at weight 0.127016

with stocks prices being

A = $22.76

B = $9.1

C = $10.11

D = $35.13

what is the portfolio value upon execution? (t = 0)

(B)

every month, the owner invests $2240.

assuming price and weight of stock is unchanged, what will be the value of stock in months to come, at (t=4)?

(you may use python or manual but i want to know how value is calculated because im not getting desired answers) THANKS

Solutions

Expert Solution

(a)

Investment amount = $18000

Investment in A = 0.127138*18000 = $2288.484

Investment in B = 0.364982*18000 = $6569.676

Investment in C = 0.369864*18000 = $6657.552

Investment in D = 0.127016*18000 = $2286.288

Total Value of investment = 2288.484 + 6569.676 + 6657.552 + 2286.288 = $17802

(b)

Amount invested each month = $2240

Investment in A = 0.127138*2240 = $284.78912

Investment in B = 0.364982*2240 = $817.55968

Investment in C = 0.369864*2240 = $828.49536

Investment in D = 0.127016*2240 = $284.51584

The above is the amount that is added to the initial investment for t = 1, 2, 3, 4

Hence, Values at t = 1 to 4 are -->

t=0 t=1 t=2 t=3 t=4
A 2288.484 2573.27312 2858.06224 3142.85136 3427.64048
B 6569.676 6854.46512 7139.25424 7424.04336 7708.83248
C 6657.552 6942.34112 7227.13024 7511.91936 7796.70848
D 2286.288 2571.07712 2855.86624 3140.65536 3425.44448
Sum 17802 18941.1565 20080.313 21219.4694 22358.6259

jeff jeffy answered 1 year ago
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