Question

you own the following portfolio of stocks. what is the portfolio weight of stock c? stock number of shares price per share a 120 $ 35 b 780 $ 31 c 450 $ 55 d 240 $ 54

Answer 1

The portfolio weight of Stock C is 30%.

Step-by-step explanation:

In order to calculate the portfolio weight of Stock C, you need to use the following formula:

`\[ \text{Portfolio Weight of Stock C} = \frac{\text{Value of Stock C}}{\text{Total Portfolio Value}} * 100 \]`

Firstly, find the value of each stock by multiplying the number of shares by the price per share. For Stock C, this would be
`\(450 \, shares * $55 = $24,750\)` . Then, calculate the total portfolio value by summing the values of all stocks:
`\(120 \, shares * $35 + 780 \, shares * $31 + 450 \, shares * $55 + 240 \, shares * $54 = $56,010\)`. Now, substitute these values into the formula:

`\[ \text{Portfolio Weight of Stock C} = ($24,750)/($56,010) * 100 \]`

Simplifying this expression gives the portfolio weight of Stock C as approximately 0.4419. To express this as a percentage, multiply by 100, yielding a portfolio weight of 44.19%. Therefore, the portfolio weight of Stock C is approximately 44.19%.

In the final part of the explanation, express the result in a clear and concise manner. The portfolio weight represents the proportion of the total portfolio value that Stock C contributes. In this case, Stock C constitutes 44.19% of the overall portfolio. This information is crucial for investors and portfolio managers in assessing the diversification and risk exposure of their portfolios.