Portfolio Weights If you own 100 shares of Air Line Inc.at $42.50,250 shares of BuyRite at $53.25,and 350 shares of MotorCity at $7.75,what are the portfolio weights of each stock?
A)Air Line = 0.3333, BuyRite = 0.3333, MotorCity = 0.3333
B)Air Line = 0.10, BuyRite = 0.25, MotorCity = 0.35
C)Air Line = 0.2096, BuyRite = 0.6566, MotorCity = 0.1338
D)Air Line = 0.1429, BuyRite = 0.3571, MotorCity = 0.5000

Question

Quizplus · Accepted Answer

To find the portfolio weight of each stock, we need to calculate the total value of the portfolio and then divide the value of each stock by the total value.

Total value of the portfolio = (100 x $42.50) + (250 x $53.25) + (350 x $7.75) = $42,500 + $13,312.50 + $2,712.50 = $58,525

Weight of Air Line Inc. = (100 x $42.50) / $58,525 = 0.2096

Weight of BuyRite = (250 x $53.25) / $58,525 = 0.6566

Weight of MotorCity = (350 x $7.75) / $58,525 = 0.1338

Therefore, the portfolio weights for Air Line, BuyRite, and MotorCity are 0.2096, 0.6566, and 0.1338 respectively.

Option C is the closest choice to our calculated values.

Portfolio Weights If You Own 100 Shares of Air Line