A portfolio has shares in three firms-100 shares of Commonwealth Bank (CBA), 200 shares of Woolworths (WOW), and 50 shares of Rio Tinto (RIO). If the price of CBA is $20, the price of WOW is $20, and the price of RIO is $130, calculate the portfolio weight of CBA and WOW.

Question

Quizplus · Accepted Answer

The total value of the portfolio can be calculated as follows:

Total value = (100 shares of CBA * $20) + (200 shares of WOW * $20) + (50 shares of RIO * $130)
Total value = $2,000 + $4,000 + $6,500
Total value = $12,500

The weight of each stock in the portfolio can be calculated by dividing the value of the shares of each stock by the total value of the portfolio:

Weight of CBA = ($2,000 / $12,500) * 100 = 16%
Weight of WOW = ($4,000 / $12,500) * 100 = 32%
Weight of RIO = ($6,500 / $12,500) * 100 = 52%

Therefore, the portfolio weight of CBA and WOW is 16% and 32%, respectively. The best choice is (C).

A Portfolio Has Shares in Three Firms-100 Shares of Commonwealth