Question

E8: Portfolio Weights An investor owns $22,000 of Adobe Systems stock, $21,500 of Dow Chemical, and $23,000 of Office Depot. What are the portfolio weights of each stock?

• Adobe System = 0.2667, Dow Chemical = 0.3333, Office Depot = 0.4000

• Adobe System = 0.3233, Dow Chemical = 0.3308, Office Depot = 0.3459

• Adobe System = 0.3308, Dow Chemical = 0.3233, Office Depot = 0.3459

• Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333

Answer 1

Weights of Total Portfolio is always equals to 1.
Now, For each stock weights are different. so, we need to calculate weights of each stock.
Investor have following stocks :
Adobe System Stock : $22000
Dow Chemical Stock : $21500
office Depot. : $23000
____________________________

Total Value of Portfolio : $66500 (i.e.$22000+$21500+$23000)

Individual weights of Stocks  : value of Stock
   Total value of portfolio

Adobe System Stock Weights : $22000   . = 0.3308
$66500

Dow Chemical Stock : $21500 = 0.3233
$66500
  

Office Depot. : $23000 . = 0.3459 .   
$66500

or

Total Weights of Portfolio = 1
Less :
Adobe System stock weights . (0.3308)
Dow chemical Stock weights . (0.3233)
__________

Balance weight of Office Depo. 0.3459

So, in view of the above working we can conclude that portfolio weights of each as follows :

adobe System = 0.3308, Dow Chemical = 0.3233, Office Depot = 0.3459