Math Problem Statement
You are considering how to invest part of your retirement savings. You have decided to put $200,000 into three stocks: 64% of the money in GoldFinger (currently $22/share), 18% of the money in Moosehead (currently $91/share), and the remainder in Venture Associates (currently $9/share). Suppose GoldFinger stock goes up to $37/share, Moosehead stock drops to $68/share, and Venture Associates stock rises to $11 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 each part of the problem:
Part (a): New Value of the Portfolio
-
Initial Allocation in Each Stock:
- GoldFinger: 64% of $200,000 =
- Moosehead: 18% of $200,000 =
- Venture Associates: Remaining 18% of $200,000 =
-
Initial Shares Purchased:
- GoldFinger Shares: shares
- Moosehead Shares: shares
- Venture Associates Shares: shares
-
New Value Calculation with Updated Prices:
- GoldFinger Value:
- Moosehead Value:
- Venture Associates Value:
-
Total New Portfolio Value:
Part (b): Portfolio Return
- Portfolio Return Calculation:
Part (c): New Portfolio We
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Math Problem Analysis
Mathematical Concepts
Investment Calculation
Percentage Allocation
Return on Investment
Weighted Averages
Formulas
Total Value = Shares * New Price
Return = (New Portfolio Value - Initial Portfolio Value) / Initial Portfolio Value
New Weight = (Value of Stock in Portfolio) / (Total Portfolio Value)
Theorems
Basic Percentage and Proportion Theorem
Suitable Grade Level
College/University Finance
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