Question

A portfolio has 70 shares of Stock A that sell for $30 per share and 125 shares of Stock B that sell for $17 per share. (a) What is the portfolio weight of Stock A?(b) What is the portfolio weight of Stock B?

Answer 1

Portfolio weight of Stock A=49.70%

Portfolio weight of Stock A=50.29%

Step-by-step explanation:

Calculation for the portfolio weight of Stock A and Stock B

First step is to calculate the total amount invested in both portfolio weight of Stock A and Stock B

Stock A and Stock B Total amount invested=

(A 70 shares*$30 per share)+ (B 125 shares*$17 per share)

Stock A and Stock B Total amount invested=$2,100+$2,125

Stock A and Stock B Total amount invested=$4,225

Now let calculate the PORTFOLIO WEIGHT OF STOCK A

Using this formula

Portfolio weight of Stock A=Stock A/Stock A and Stock B Total amount invested

Let plug in the formula

Portfolio weight of Stock A=(70 shares*$30 per share)/$4,225

Portfolio weight of Stock A=$2,100/$4,225

Portfolio weight of Stock A=0.4970*100

Portfolio weight of Stock A=49.70%

Therefore the Portfolio weight of Stock A

will be 49.70%

Calculation for PORTFOLIO WEIGHT OF STOCK B

Using this formula

Portfolio weight of Stock B=Stock B/Stock A and Stock B Total amount invested

Let plug in the formula

Portfolio weight of Stock B=(125 shares*$17 per share)/$4,225

Portfolio weight of Stock B=$2,125/$4,225

Portfolio weight of Stock B=0.5029*100

Portfolio weight of Stock B=50.29%

Therefore the Portfolio weight of Stock will be 50.29%