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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