Question

Consider a portfolio that includes the following two​ companies: Company 1 Company 2 Day Price Number of Shares Price Number of Shares 1 ​$8.00 750 ​$13.00 1 comma 300 2 ​$8.93 750 ​$13.08 1 comma 300 On Day 1 the portfolio has weights which are equal to the value of each​ company's shares relative to the total value of both companies. What is the portfolio weight for Company​ 1?

Answer 1

26.20%

Step-by-step explanation:

Total value of shares of Company 1:

= $8 x 750

= $6,000

Total Value of shares of Company 2:

= $13 x 1,300

= $16,900

Total Value of both companies = $6,000 + $16,900

= $22,900

Now, on Day 1 weights are equal to total value of share of Company 1 divided by Total value of both companies.

Weight of Company 1 = $6,000 / $22,900

= 0.2620

= 26.20%