Question

The composition of the Fingroup Fund portfolio is as follows:

Stock	Shares			Price
A		200,000		$	34
B		292,000			36
C		404,000			24
D		640,000			45

During the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $70 per share and 185,000 shares of stock F at $80 per share.

What is the portfolio turnover rate? (Round your answer to 1 decimal place.)

Answer 1

Opening balance of Portfolio = sum of (number of shares of each stock * price of each Stock)

=(200000*34)+(292000*36)+(404000*24)+(640000*45)

=55808000

Stock D sold, proceeds = 640000*45=28800000

Total sales = 28800000

Stock E bought for 200000*70=14000000

Stock F bought for 185000*80= 14800000

Total purchase = 14000000+14800000= 28800000

Ending balance of Portfolio = Beginning balance - sales + purchase

=55808000 -28800000 + 28800000

=55808000

Average portfolio = (opening balance + closing)/2

=(55808000+55808000)/2

=55808000

Portfolio turnover rate formula = (lower of sales or purchase)/average portfolio balance

=28800000/55808000

=0.5160550459 or 51.6%

So portfolio turnover rate is 51.6%

=