In: Finance
You are considering how to invest part of your retirement savings.You have decided to put $300,000 into three stocks: 59% of the money in GoldFinger (currently $29/share), 7% of the money in Moosehead (currently $73/share), and the remainder in Venture Associates (currently $7/share).
Suppose GoldFinger stock goes up to $43/share, Moosehead stock drops to $55/share, and Venture Associates stock drops to $2 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?
Solution:-
First we need to Calculate Number of share will be purchased of Each stock-
Number of share of Gold Finger = = 6,103.45 Shares
Number of share of Moosehead = = 287.67 Shares
Number of share of Venture Associates = = 14,571.43 Shares
A. To Calculate New Value of Portfolio-
New Value of Portfolio = 6,103.45 Shares * $43 + 287.67 shares * $55 + 14,571.43 shares * $2
New Value of Portfolio = $3,07,413.
B. To Calculate the Return of Portfolio-
Return =
Return = 2.47%
C. To Calculate New Portfolio Weights-
Weight of Gold Finger = = 85.37%
Weight of Moosehead = = 5.15%
Weight of Venture Associates = = 9.48%
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