Question

An investor owns $3,000 of Adobe Systems stock, $4,000 of Dow Chemical, and $4,000 of Office Depot. What are the portfolio weights of each stock?

Answer 1

Portfolio weights are the proportion of each stock in an investor's total investment portfolio. To find the weight of Adobe Systems, Dow Chemical, and Office Depot in the given portfolio, divide each stock's value by the portfolio's total value and then convert it into percentages.

Step-by-step explanation:

The subject of the question involves calculating portfolio weights, which are used to determine the percentage of each stock in an investor's portfolio. To calculate the portfolio weight of each stock, you divide the value of each holding by the total value of the portfolio. In this case, the total value of the portfolio is $3,000 (Adobe Systems) + $4,000 (Dow Chemical) + $4,000 (Office Depot) = $11,000.

• The portfolio weight of Adobe Systems stock is $3,000 / $11,000 = 0.2727 or 27.27%.
• The portfolio weight of Dow Chemical is $4,000 / $11,000 = 0.3636 or 36.36%.
• The portfolio weight of Office Depot is $4,000 / $11,000 = 0.3636 or 36.36%.

Therefore, the investor's portfolio consists of 27.27% Adobe Systems stock, 36.36% Dow Chemical, and 36.36% Office Depot.