Question

Your portfolio consists of 100 shares of CSH and 50 shares of EJH, which you just bought at $20 and $30 per share respectully.

(a) what fraction of your portfolio is invested in CSH In EJH?

(b) If CSH increases to $22 and EJH decreases to $29, what is the return on your portfolio?

Answer 1

Given about a portfolio,

portfolio consists of 100 shares of CSH and 50 shares of EJH, which you just bought at $20 and $30 per share respectively,

So, Investment in CSH = 100*20 = $2000

Investment in EJH = 50*30 = $1500

So, total investment = 2000 + 1500 = $3500

a). fraction of portfolio investment is CSH = investment in CSH/total investment = 2000/3500 = 0.5714 or 57.14%

fraction of portfolio investment is EJH = investment in EJH/total investment = 1500/3500 = 0.4286 or 42.86%

b). New price of CSH = $22

New price of EJH = $29

So, new portfolio value = 22*100 + 29*50 = $3650

So, return on portfolio is (New portfolio value - initial value)/initial value = (3650-3500)/3500 = 4.29%