$\begin{array}{|l|r|r|r}
\hline \text { Asset } & \text { Number of shares } & \text { Initial price (\$) } & \text { End price (\$) } \
\hline \text { A } & 2000 & 6.00 & 6.10 \
\hline \text { B } & 5000 & 3.00 & 2.25 \
\hline \text { C } & 3000 & 12.00 & 11.50 \
\hline \text { D } & 12000 & 8.50 & 8.85 \
\hline
\end{array}$
-An investor purchased the investment above.If continuously compounded returns are used,what is the equal-weighted return on the portfolio?
A) $-12.6 \%$
B) $-10.5 \%$
C) $-3.2 \%$
D)$2.3\%$

Question

Quizplus · Accepted Answer

We must first calculate the continuously compounded return for each of the four shares.Using equation 1.5,page 14,the return for asset A is ln(6.10/6.00)= 0.165,for asset B is ln(2.25/3.00)= -0.288,for asset C is ln(11.50/12.00)= -0.043 and for asset D is ln(8.85/8.5)= 0.040.Using equation 1.15,page 23,the equal-weighted return is calculated as R = [(0.165)+ (-0.288)+ (-0.043)+ (0.040)]/4 = -0.0.0315 or -3.2%.

-An Investor Purchased the Investment Above −12.6%-12.6 \%−12.6% B) −10.5%-10.5 \%−10.5%

-An Investor Purchased the Investment Above $-12.6 \%$ B) $-10.5 \%$