Question
At the beginning of the year, you invested $8,000 in four stocks, but the investment in each stock was not equal. The amount split up
At the beginning of the year, you invested $8,000 in four stocks, but the investment in each stock was not equal. The amount split up in your portfolio is shown below:
| Stock | Amount invested |
|---|---|
| Stock A | $1,000 |
| Stock B | $2,000 |
| Stock C | $1,000 |
| Stock D | $4,000 |
Calculate the weight of each stock in the portfolio (the percentage invested in each stock).
| Weight of Stock A | = | 0.125 |
| Weight of Stock B | = | 0.25 |
| Weight of Stock C | = | 0.125 |
| Weight of Stock D | = | 0.5 |
Now at the end of the year the stocks have produced the following stock returns:
| Stock | Stock return |
|---|---|
| Stock A | 12% |
| Stock B | 39% |
| Stock C | -15% |
| Stock D | 9% |
The return on this stock portfolio is the weighted average of each of the component stocks' returns. Use the weights calculated above to determine the stock portfolio's return over the past year.
4.875%
21.375%
13.875%
15.00%
8.25%
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Basic Finance An Introduction To Financial Institutions, Investments And Management
Authors: Herbert B Mayo
9th Edition
0324322291, 9780324322293
