$\begin{array}{|c|c|c|}
\hline \text { Asset } & \begin{array}{c}
\text { Price at } \
\text { start of } \
\text { period (\$) }
\end{array} & \begin{array}{c}
\text { Price at } \
\text { end of } \
\text { period (\$) }
\end{array} \
\hline \text { A } & \$ 3.25 & \$ 4.25 \
\hline \text { B } & \$ 4.12 & \$ 3.85 \
\hline & & \
\hline
\end{array}$
-Given the prices for A and B at the start and end of the period,if an investor holds 1000 shares in asset A and 5000 in asset B,what is her value-weighted return on the portfolio?
A)$-3.12 \%$
B)$-2.23\%$
C)$-1.12 \%$
D)$-2.56 \%$

Question

Quizplus · Accepted Answer

Using equation 1.5,page 14,the continuously compounded return for share A is ln(4.25/3.25)= 0.268 or 26.8%,and for share B is ln(3.85/4.12)= -0.068 or -6.8%.The total value of the portfolio is (1000 F1F1F1S1F1F1F10 3.25 + 5000 F1F1F1S1F1F1F10 4.12)= 23850,of which 3250/23850 = 0.136 is invested in asset A,and 0.864 is invested in asset B.Using equation 1.14,page 22,the value-weighted (continuously compounded)return on the portfolio is 0.136(26.8)+ 0.864(-6.8)= -2.23%.

-Given the Prices for a and B at the Start