Question

1. You have a portfolio of two stocks that has a total value of $28,000. The portfolio is 40 percent invested in Stock J. If you own 185 shares of Stock K, what is Stock K's share price?

2. What are the portfolio weights for a portfolio that has 200 shares of stock A that sell for $97 per share and 175 shares of Stock B that sell for $134 per share? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616)

Stock A?

Stock B?

Answer 1

1) Total value of portfolio = $28,000

Portfolio consists of 40% of Stock J

weight of Stock K = (100% - 40%) = 60%

Value of stock K = $28,000 * 60% = $16,800

Portfolio consists of 185 shares of Stock K.

Stock K's share price = $16,800 / 185 = $90.81

Stock K's share price = $90.81

.

2) Value of stock A in portfolio = (200 * $97) = $19,400

Value of stock B in portfolio = (175 * $134) = $23,450

Total value of the portfolio = $42,850

Weight of Stock A = ($19,400 / $42,850) = 0.4527

Weight of Stock B = ($23,450 / $42,850) = 0.5473

So, Stock A = 0.4527

Stock B = 0.5473