A portfolio has three stocks - 100 shares of Yahoo (YHOO),200 Shares of General Motors (GM),and 50 shares of Standard and Poor's Index Fund (SPY).If the price of YHOO is $20,the price of GM is $20,and the price of SPY is $130,calculate the portfolio weight of YHOO and GM.

Question

Quizplus · Accepted Answer

To calculate the portfolio weight for each stock, we need to find the total value of the portfolio and then divide each stock's value by the total value.

Total value of the portfolio:

Value of YHOO = 100 shares x $20/share = $2,000
Value of GM = 200 shares x $20/share = $4,000
Value of SPY = 50 shares x $130/share = $6,500

Total value of the portfolio = $2,000 + $4,000 + $6,500 = $12,500

Portfolio weight of YHOO:

Value of YHOO / Total value of the portfolio = $2,000 / $12,500 = 0.16 or 16%

Portfolio weight of GM:

Value of GM / Total value of the portfolio = $4,000 / $12,500 = 0.32 or 32%

Therefore, the portfolio weight of YHOO is 16% and the portfolio weight of GM is 32%, which is only given in choice D.

A Portfolio Has Three Stocks - 100 Shares of Yahoo