The price at the start of the period for asset A is $5 and for asset B is $6.At the end of the period,asset A has fallen to $4 and asset B has risen to $6.50.Calculate the continuously compounded return on a price-weighted portfolio consisting of shares A and B.
A) $-5.8 \%$
B) $-4.9 \%$
C) $-2.5 \%$
D)$2.5\%$

Question

The price at the start of the period for asset A is $5 and for asset B is $6.At the end of the period,asset A has fallen to $4 and asset B has risen to $6.50.Calculate the continuously compounded return on a price-weighted portfolio consisting of shares A and B.
A) $-5.8 \%$ 
B) $-4.9 \%$
C) $-2.5 \%$
D)$2.5\%$

Quizplus · Accepted Answer

Using equation 1.5,page 14,the return on asset A is ln(4/5)= -0.223 and for asset B is ln(6.5/6)= 0.080.The total cost = -0.058 or -5.8%.

The Price at the Start of the Period for Asset −5.8%-5.8 \%−5.8%

The Price at the Start of the Period for Asset $-5.8 \%$