Question

A portfolio has three stocks 110 shares of Yahoo (YHOO), 210 Shares of General Motors(GM), and 70 shares of Standard and Poorʹs Index Fund (SPY). If the price of YHOO is $20, theprice of GM is $20, and the price of SPY is $130, calculate the portfolio weight of YHOO andGM.A) 10.6%, 13.5%B) 9.9%, 25.7%C) 13.5%, 24.4%D) 14.2%, 27.1%

Answer 1

Answer:

Option (D) is correct.

Explanation:

Value of Yahoo:

= Shares × Price

= 110 shares × $20

= $2,200

Value of General Motors(GM):

= Shares × Price

= 210 shares × $20

= $4,200

Value of Standard and Poorʹs Index Fund (SPY):

= Shares × Price

= 70 shares × $130

= $9,100

Total value = Value of Yahoo + Value of GM + Value of SPY

                   = $2,200 + $4,200 + $9,100

                   = $15,500

Therefore,

Portfolio weight of YHOO:

= Value of YAHOO ÷ Total value

= $2,200 ÷  $15,500

= 0.1419 or 14.19%

Portfolio weight of GM:

= Value of GM ÷ Total value

= $4,200 ÷  $15,500

= 0.2709 or 27.09%

Therefore, the portfolio weight of YHOO and GM are 14.2% (approx) and 27.1% (approx), respectively.