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Accounting, Finance, SPSS
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English (U.S.)
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Topic:

Computing Portfolio Value

Coursework Instructions:

Problem 1 Chapter 11

You are considering how to invest part of your retirement savings. You have decided to put$ 200,000 into three stocks: 50% of the money in Goldfinger (currently $25/share), 25% of the money in Moosehead (currently $80/share), and the remainder in Venture Associates (currently $2/share). If Goldfinger stock goes up to $30/share, Moosehead stock drops to $60/share, and Venture Associates stock rises to $3 per share.

  1. What is the new value of the portfolio?
  2. What return did the portfolio earn?
  3. If you don't buy or sell any shares after the price change, what are your new portfolio weights?
Coursework Sample Content Preview:

Chapter 11: Problem 1 Coursework
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The details can be summarized as follows:
Total initial capital = $200,000
Goldfinger current price = $25
Moosehead current price = $80
Venture Associates' current price = $2
Goldfinger new price = $30
Moosehead new price = $60
Venture associates new price = $3
* Before calculating the new portfolio value, it is crucial to recognize that a portfolio refers to a group of several securities tailored to reduce the inherent risks within the investor's capital. A portfolio can be a collection of programs, projects, operations, and subsidiary portfolios managed concurrently to attain the firm's strategic objectives (Martinsuo & Geraldi, 2020). It is a diversification technique that reduces unsystematic risk.
New value = [(Initial Outlay*Goldfinger percentage/ Goldfinger current price)* Goldfinger new price] + [Initial outlay*Moosehead percentage/Moosehead current price)*Moosehead new price] + [(Initial Outlay*Venture associates percentage/Venture associates current price)*Venture associates new price].
The formula delineated above incorporates calculating the number of shares for the different companies, which is multiplied by the new prices to obtain the new portfolio value. The formula of Initial Outlay*company's percentage/company's current price is used to compute the amount of increase in the respective firm's stock.
New value = ($200,000*50%/25)*$30 + ($200,000*25%/80)*$60 + ($200,000*25%/2)*$3
New value = (4000*$30) + (625*$60) + (25,000*$3).
New value = $120,000 + $37,500 + $75,000 = ...
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