A stock market comprises 5000 shares of stock A and 2000 shares of stock B.Assume the share prices for stocks A and B are $20 and $35,respectively.If you have $15,000 to invest and you want to hold the market portfolio,how much of your money will you invest in Stock A?

Question

Quizplus · Accepted Answer

First, we need to calculate the total value of the market portfolio:

Total value = (5000 x $20) + (2000 x $35) = $100,000 + $70,000 = $170,000

To find out how much of our money we should invest in Stock A, we need to calculate the proportion of the total value that corresponds to Stock A:

Proportion of Stock A = (5000 x $20) / $170,000 = 0.58823

Finally, we can use this proportion to calculate how much of our $15,000 to invest in Stock A:

Amount to invest in Stock A = Proportion of Stock A x Total amount to invest = 0.58823 x $15,000 ≈ $8,823.53

Therefore, the best choice is B.

A Stock Market Comprises 5000 Shares of Stock a and 2000