Use the following information to answer the question(s)below.
Suppose all possible investment opportunities in the world are limited to the four stocks listed in the table below:
-Suppose that you are holding a market portfolio and you have invested $9000 in Rearden Metal.The amount that you have invested in Taggart Transcontinental is closest to:
A)$4500.
B)$6000.
C)$7715.
D)$9000.

Question

Use the following information to answer the question(s)below.
Suppose all possible investment opportunities in the world are limited to the four stocks listed in the table below: 
-Suppose that you are holding a market portfolio and you have invested $9000 in Rearden Metal.The amount that you have invested in Taggart Transcontinental is closest to:
A)$4500. 
B)$6000. 
C)$7715. 
D)$9000.

Quizplus · Accepted Answer

The market portfolio includes all available investment opportunities in the world, so the weights of each stock in the portfolio should represent the market value of that stock. 
If you have invested $9000 in Rearden Metal, which has a weight of 0.40 in the market portfolio, then the total market value of the portfolio is:
$9000 / 0.40 = $22500
Using the same logic, we can find the market value of Taggart Transcontinental:
Market value of Taggart Transcontinental = $22500 x 0.25 = $5625
Therefore, the closest amount you have invested in Taggart Transcontinental is $6000 (which is greater than $5625, but it's the closest choice).

Use the Following Information to Answer the Question(s)below