An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock?
A) Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333
B) Adobe System = 0.2, Dow Chemical = 0.3, Office Depot = 0.5
C) Adobe System = 0.3, Dow Chemical = 0.2, Office Depot = 0.5
D) Adobe System = 0.2667, Dow Chemical = 0.3333, Office Depot = 0.4

Question

Quizplus · Accepted Answer

The total value of the portfolio is $10,000 (Adobe) + $15,000 (Dow Chemical) + $25,000 (Office Depot) = $50,000. The weight of each stock in the portfolio is calculated by dividing the value of each stock by the total value of the portfolio. Therefore, Adobe Systems = $10,000 / $50,000 = 0.2, Dow Chemical = $15,000 / $50,000 = 0.3, and Office Depot = $25,000 / $50,000 = 0.5.

An Investor Owns $10,000 of Adobe Systems Stock, $15,000 of Dow