Question

You are considering how to invest part of your retirement savings. You have decided to put 5600,000 into three stocks 63% of the money in GoldFinger (currently 52/share), 21% of the money in Moosehead (currently $85/share), and the remainder in Venture Associates (currently 54/share) Suppose GoldFinger stock goes up to 536/share, Moosehead stock drops to $55/share, and Venture Associates stock rises to $13 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? a. What is the new value of the portfolio? The new value of the portfolio is (Round to the nearest dollar)

Answer 1

600000 Amount to invest Particulars GoldFinger Moosehead Venture Associate Allocation % 63% 21% 16% Price $ 21 85 45.93 Solution Calculation of number of share to be purchased Particulars Allocation % Goldfinger Moosehead Venture Associate Total 63% 21% 16% 100% Purchase New Portfolio Amount | Value Price $ Price $ Weight 378000| 21 366480001 0.622 1260001 85 55 815291 0.078 96000 4 13 3120001 0.300 600000 1041529 where, Amount = Value = Amount to invest X Allocation % Amount X New Price / Purchase Price Part a) New Value of portfolio New value of Portfolio is $ 1041529 Part b) What is return portfolio earned Return = Return = New Value - Amount Invested Amount Invested 441529 600000 73.59% Return = Hence, Return is 73.59% Part c) New Portfolio Weight Particulars GoldFinger Moosehead Venture Associate Total Portfolio Weight 0.622 0.078 0.300 1.000