Question

The composition of the Fingroup Fund portfolio is as follows: Stock Shares Price A 200,000 $ 35 B 300,000 40 C 400,000 20 D 600,000 25 If during the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $50 per share and 200,000 shares of stock F at $25 per share, what is the portfolio turnover rate?

Answer 1

Answer: 35.71%  

Explanation:

Value of assets sold and replaced(D) = Stock × Share price

= 600,000 × $25

= $15,000,000.

Value of all assets = (Stock × Share price) of A + (Stock × Share price) of B + (Stock × Share price) of C + (Stock × Share price) of D

= (200,000 × $35) + (300,000 × $40) + (400,000 × $20) + (600,000 × $25)

= $42,000,000

$Turnover\ rate = \frac{Value\ of\ the\ assets\ sold\ and\ replaced}{value\ of\ all\ the\ assets}$

$Turnover\ rate = \frac{15,000,000}{42,000,000}$

                               = 0.3571

                                = 35.71%