You are considering how to invest part of your retirement savings. You have deci

Question

You are considering how to invest part of your retirement savings. You have decided to put $200,000 into three stocks: 69% of the money in GoldFinger (currently $15 share), 15% of the money in Moosehead (currently $76/share), and the remainder in Venture Associates (currently $5/share). Suppose GoldFinger stock goes up to $35/share, Moosehead stock drops to $62/share, and Venture Associates stock rises to $18 per share. What is the new value of the portfolio? What return did the portfolio earn? If you don't buy or sell any shares after the price change, what are your new portfolio weights?

Explanation / Answer

Stock Current Price Weight Value invested Number of shares Later Price Deviation Value of Portfolio Goldfinger 15 0.69 138000 9200 35 20 322000 Moosehead 76 0.15 30000 395 62 -14 24474 Venture 5 0.16 32000 6400 18 13 115200 1 200000 461674 Initial Value of portfolio 200000 Changed Value of portfolio 461674 Change 261674 Return of Portfolio % 130.837 New Value of Portfolio New Weight (value / total value) 322000 0.70 24474 0.05 115200 0.25 461674 1

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