Question

You are considering how to invest part of your retirement savings.You have decided to put $300,000 into three? stocks: 66% of the money in GoldFinger? (currently $19?/share), 13% of the money in Moosehead? (currently $97?/share), and the remainder in Venture Associates? (currently $10?/share). Suppose GoldFinger stock goes up to $40?/share, Moosehead stock drops to $57?/share, and Venture Associates stock rises to $19 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?

Answer 1

Total money put in stocks = 300,000
No of shares of Goldfinger = 66%*300000/ 19 = 10421.0526 shares
No of shares of Moosehaead = 13% * 300000/97 = 402.0618
No of shares of Venture Assiociates = 21% * 300000 / 10 = 6300

a) New value of portfolio = No of shares of Goldfinger * Current price/share +  No of shares of Moosehaead * Current price/share + No of shares of Venture Assiociates * Current Price/share = 10421.0526 * 40 + 402.0618 * 57 + 6300 * 19 = 559,459.6266

b) Return of The protfolio = (559,459.6266-300,000)/300,000 = 86.49%
c)New Portfolio weight of  Goldfinger = 10421.0526 * 40/559,459.6266 = 74.51%
Portfolio weight of Moosehaead = 402.0618 * 57 /559,459.6266= 4.097%
Portfolio weight of Venture Assiociates = 6300 * 19/559,459.6266 = 21.395%

Best of Luck. God Bless