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2. Consider the following data for two stocks: Stock A B A B Date Price Shares Outstanding 01/2022 10 01/2022 30 02/2022 5 02/2022

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2. Consider the following data for two stocks: Stock A B A B Date Price Shares Outstanding 01/2022 10 01/2022 30 02/2022 5 02/2022 40 1 4,000 2,000 4,000 2,000 (a) (5 points) At the end of January 2022 you form a value-weighted portfolio. For each stock i it's weight in a value-weighted portfolio is the market value of stock i divided by the total market value of all stocks in the portfolio: MV ', MV, where the market value is calculated as the price times the shares outstanding. Calculate the weights of the value-weighted portfolio formed at the end of January 2022. (b) (5 points) Calculate the returns of the value-weighted portfolio during February 2022. (c) (10 points) At the end of February 2022, have your portfolio weights changed? If yes, calculate the new portfolio weights. rcego (d) (5 points) If you want to maintain a value-weighted portfolio, do you have to rebalance your port- folio? Why or why not? (Said differently, at the end of February 2022, if you form a new value- weighted portfolio are the weights the same or different compared to the weights calculated in part c above.)

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