You have $350,000 to invest and have decided to put 40% in Alpha stock currently valued at $40 per share, 25% in Beta stock currently valued at $43.75 and 35% in Delta stock currently valued at $61.25 per share. If both Alpha and Beta increase by $2 per share and Delta increases by $1 per share, then what is the new value of the portfolio?
A)$361,000
B)$363,000
C)$359,000
D)$356,000

Question

You have $350,000 to invest and have decided to put 40% in Alpha stock currently valued at $40 per share, 25% in Beta stock currently valued at $43.75 and 35% in Delta stock currently valued at $61.25 per share.   If both Alpha and Beta increase by $2 per share and Delta increases by $1 per share, then what is the new value of the portfolio?
A)​$361,000
B)​$363,000
C)​$359,000
D)​$356,000

Quizplus · Accepted Answer

- 40% of $350,000 = $140,000 in Alpha stock with current value of $40 per share, so you own 3,500 shares
- 25% of $350,000 = $87,500 in Beta stock with current value of $43.75 per share, so you own 2,000 shares
- 35% of $350,000 = $122,500 in Delta stock with current value of $61.25 per share, so you own 2,000 shares

After the increase:

- Alpha stock increases by $2 per share, so new value per share is $42
- Beta stock increases by $2 per share, so new value per share is $45.75
- Delta stock increases by $1 per share, so new value per share is $62.25

New value of the portfolio:

- Alpha stock: 3,500 shares x $42 per share = $147,000
- Beta stock: 2,000 shares x $45.75 per share = $91,500
- Delta stock: 2,000 shares x $62.25 per share = $124,500
- Total value: $147,000 + $91,500 + $124,500 = $363,000

Therefore, the best choice is B, with the reasoning explained above.

You Have $350,000 to Invest and Have Decided to Put