Question

3) Suppose you buy 100 shares of Scotia Bank at $85 per share, and 80 shares of CIBC at $75 per share. If Scotia Bank’s stock goes up to $88.50 per share and CIBC's stock goes up to $77 per share, what is your portfolio return?

A) 2%

B) 0%

C) 3.5%

D) 3%

E) 4.5%

Answer 1

Scotia Bank
Number of shares = 100
Purchase Cost per share = $85
Total Purchase Cost = 100*85 = $8500

CIBC
Number of shares = 80
Purchase Cost per share = $75
Total Purchase Cost = 80*75 = $6000

Total Portfolio Value = 8500 + 6000 = $14500

New Price of Scotia = $88.50
Value of Scotia = 100*88.50 = $8850

New Price of CIBC = $77
Value of CIBC = 80*77 = $6160

New Portfolio Value = 8850 + 6160 = $15010

Portfoli Return = (New Value - Purchase Cost)/Purchase Cost *100

= (15010 - 14500)/14500 *100 = 3.5%