A stock market comprises 4600 shares of stock A and 1600 shares of stock B. Assume the share prices for stocks A and B are $15 and $30, 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

B) Multiply the number of shares of each stock by its price and add the values.
Thus, (4600 × $15) + (1600 × $30) = $117,000.
Stock A is worth 4600 × $15 = $69,000;
Proportion of stock A in the market portfolio = $69,000 / $117,000 = 58.974359%;
Value of stock A in portfolio = 58.974359% × 15,000 = $8846.15

A Stock Market Comprises 4600 Shares of Stock a and 1600