Portfolio Weights If you own 400 shares of Air Line Inc. at $44.50, 500 shares of BuyRite at $52.90, and 100 shares of Motor City at $9.25, what are the portfolio weights of each stock?
A) Air Line = .3333, BuyRite = .3333, MotorCity = .3333
B) Air Line = .40, BuyRite = .50, MotorCity = .10
C) Air Line = .3940, BuyRite = .5855, MotorCity = .0205
D) Air Line = .4173, BuyRite = .4960, MotorCity = .0867

Question

Quizplus · Accepted Answer

To find the portfolio weights, we need to first calculate the total value of the portfolio, which is (400 shares x $44.50) + (500 shares x $52.90) + (100 shares x $9.25) = $17,800 + $26,450 + $925 = $45,175.

Next, we divide the value of each stock by the total value of the portfolio to find the portfolio weight:

- Air Line: (400 shares x $44.50) / $45,175 = 0.3940 or 39.40%
- BuyRite: (500 shares x $52.90) / $45,175 = 0.5855 or 58.55%
- MotorCity: (100 shares x $9.25) / $45,175 = 0.0205 or 2.05%

Therefore, the answer is C: Air Line = .3940, BuyRite = .5855, MotorCity = .0205

Portfolio Weights If You Own 400 Shares of Air Line