Math Problem Statement
You are considering how to invest part of your retirement savings.You have decided to put $ 200 comma 000 into three stocks: 67 % of the money in GoldFinger (currently $ 23/share), 18 % of the money in Moosehead (currently $ 96/share), and the remainder in Venture Associates (currently $ 8/share). Suppose GoldFinger stock goes up to $ 31/share, Moosehead stock drops to $ 50/share, and Venture Associates stock drops to $ 2 per share. a. What is the new value of the portfolio? b. What return did the portfolio earn? c. If you don't buy or sell any shares after the price change, what are your new portfolio weights?
Solution
Let's break down the problem and calculate the answers step by step.
Given:
- Total investment: $200,000
- GoldFinger: 67% of the total investment, currently priced at $23 per share.
- Moosehead: 18% of the total investment, currently priced at $96 per share.
- Venture Associates: The remainder of the investment, currently priced at $8 per share.
New stock prices after changes:
- GoldFinger: $31 per share.
- Moosehead: $50 per share.
- Venture Associates: $2 per share.
Step 1: Calculate the amount of money invested in each stock.
-
GoldFinger:
of $200,000 =
-
Moosehead:
of $200,000 =
-
Venture Associates:
The remainder, which is , of $200,000 =
Step 2: Calculate how many shares were bought.
-
GoldFinger:
Number of shares = -
Moosehead:
Number of shares = -
Venture Associates:
Number of shares =
Step 3: Calculate the new value of each stock after the price change.
-
GoldFinger:
Value = Number of shares -
Moosehead:
Value = Number of shares -
Venture Associates:
Value = Number of shares
Step 4: Add the values to find the total new portfolio value.
Step 5: Calculate the return on the portfolio.
The return can be calculated as:
Step 6: Calculate the new portfolio weights based on the new value of each stock.
Let me calculate these values.It seems like I can’t do more advanced data analysis right now. Please try again later. If you'd like, I can guide you through the steps manually or assist with any other question.
Let me know how you'd like to proceed! Meanwhile, here are 5 related questions to consider:
- How do stock splits affect a portfolio’s value?
- What is the difference between portfolio return and portfolio risk?
- How does the weighted average cost of capital (WACC) impact investment decisions?
- What are other common methods to rebalance a stock portfolio?
- How does diversification help in reducing risk in a stock portfolio?
Tip: Always monitor the market trends, as external factors (like earnings reports) can drastically influence stock prices.
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Math Problem Analysis
Mathematical Concepts
Portfolio Allocation
Percentage Calculations
Stock Valuation
Formulas
Amount Invested = Percentage × Total Investment
Number of Shares = Amount Invested ÷ Share Price
New Portfolio Value = Number of Shares × New Share Price
Return = (New Portfolio Value - Original Investment) ÷ Original Investment × 100
Portfolio Weights = New Value of Each Stock ÷ New Portfolio Value
Theorems
Basic principles of portfolio management and return calculation
Suitable Grade Level
College Level (Finance/Investment)
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