Question

You are considering how to invest part of your retirement savings.You have decided to put $ 400 comma 000 into three​ stocks: 51 % of the money in GoldFinger​ (currently $ 20​/share), 19 % of the money in Moosehead​ (currently $ 90​/share), and the remainder in Venture Associates​ (currently $ 6​/share). Suppose GoldFinger stock goes up to $ 38​/share, Moosehead stock drops to $ 60​/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?

Answer 1

The new value of the portfolio = $698266.4

The return that the portfolio earn = 74.57%

Step-by-step explanation:

GIven that;

Retirement amount = $400,000

Number of shares in GoldFinger = 51% of the 400,000/20

Number of shares in GoldFinger = 0.51 × 400000/20

Number of shares in GoldFinger = 10,200

Number of shares in Moosehead = 19% of 400,000/90

Number of shares in Moosehead = 0.19 × 400000/90

Number of shares in Moosehead = 844.44

Number of shares in Venture Associates = (1- (51%+19%) of 400000/6

Number of shares in Venture Associates = (1- (0.70) × 400000/6

Number of shares in Venture Associates = 0.30 × 400000/6

Number of shares in Venture Associates = 20000

∴

(a)

The new value of the portfolio = (10200 × 38 )+( 844.44 × 60) + (20000 × 13)

The new value of the portfolio = $698266.4

(b) the return that the portfolio earn = (new value of the portfolio - retirement savings)/retirement savings

the return that the portfolio earn = (698266.4 - 400000)/400000

the return that the portfolio earn = 0.7457

the return that the portfolio earn = 74.57%