Ed Lawrence has $100,000 invested. Of that, $30,000 is invested in Tim Hortons stock, $25,000 is invested in T-bills, and the remainder is invested in corporate bonds. Which of the following is NOT correct regarding his portfolio weights? (All values are current market values.)
A) Ed has 30% of his portfolio invested in stocks.
B) Ed has 45% of his portfolio invested in corporate bonds.
C) Ed has 70% of his portfolio invested in assets other than stocks.
D) Ed has 70% of his portfolio invested in risk-free assets.
E) If Ed sells his corporate bonds and buys Suncor stock with the proceeds, he will end up with 75% of his portfolio invested in stocks.

Question

Quizplus · Accepted Answer

The total investment is $100,000, with $30,000 in stocks and $25,000 in T-bills. The remainder, $45,000, is in corporate bonds. Therefore, 30% is in stocks, 25% in T-bills, and 45% in corporate bonds. D is incorrect because only the $25,000 in T-bills can be considered risk-free, making up 25% of the portfolio, not 70%.

Ed Lawrence Has $100,000 Invested