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 have invested $30,000 in the market portfolio.Then the number of shares of Rearden Metal that you hold is closest to:
A)450 shares.
B)690 shares.
C)1400 shares.
D)2300 shares.

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 have invested $30,000 in the market portfolio.Then the number of shares of Rearden Metal that you hold is closest to:
A)450 shares. 
B)690 shares. 
C)1400 shares. 
D)2300 shares.

Quizplus · Accepted Answer

To find the number of shares of Rearden Metal, we need to calculate what percentage of the market portfolio is invested in Rearden Metal and then multiply that percentage by the initial investment of $30,000.

The total value of the market portfolio is $1,500,000, with Rearden Metal representing 30% of the portfolio ($450,000). Therefore, the initial investment of $30,000 represents 2% of the total value of the market portfolio. Multiplying this percentage by the value of Rearden Metal gives us $9,000 invested in Rearden Metal.

To find the number of shares of Rearden Metal, we need to divide the total investment by the price per share, which is $6.50. Therefore, the number of shares of Rearden Metal held is closest to $9,000/$6.50, or 1,384 shares. This is closest to choice B, 690 shares.

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