An investor owns $8,000 of Adobe Systems stock, $5,000 of Dow Chemical, and $3,000 of Office Depot. What are the portfolio weights of each stock?
A) Adobe: 0.5, Dow Chemical: 0.31, Office Depot: 0.19
B) Adobe: 0.5, Dow Chemical: 0.32, Office Depot: 0.18
C) Adobe: 0.5, Dow Chemical: 0.13, Office Depot: 0.27
D) Adobe: 0.5, Dow Chemical: 0.19, Office Depot: 0.31

Question

Quizplus · Accepted Answer

The total value of the portfolio is $8,000 (Adobe) + $5,000 (Dow Chemical) + $3,000 (Office Depot) = $16,000. The weight of each stock in the portfolio is calculated by dividing the value of each stock by the total portfolio value. Thus, Adobe's weight is $8,000 / $16,000 = 0.5, Dow Chemical's weight is $5,000 / $16,000 = 0.3125 (rounded to 0.31), and Office Depot's weight is $3,000 / $16,000 = 0.1875 (rounded to 0.19).

An Investor Owns $8,000 of Adobe Systems Stock, $5,000 of Dow