You are considering how to invest part of your retirement savings. You have decided to put $ 300 comma 000 into three stocks: 55 % of the money in GoldFinger (currently $ 23 /share), 22 % of the money in Moosehead (currently $ 97 /share), and the remainder in Venture Associates (currently $ 5 /share). Suppose GoldFinger stock goes up to $ 32 /share, Moosehead stock drops to $ 66 /share, and Venture Associates stock drops to $ 3 per share. a. What is the new value of the portfolio? b. What return did the portfolio earn? c. If you don't buy or sell any shares after the price change, what are your new portfolio weights?

a. The new value of the portfolio:$315,848

b. Portfolio return: 5.28%

c. New portfolio weights:

+ Gold Finger: 73%

+ Moosehead: 14%

+ Venture Associates: 13%

Explanation:

- Current portfolio as followed:

+ Gold Finger: Investment amount at 300,000 x 55% = $165,000, Number of shares: 165,000/23 = 7,174 shares.

+ Moosehead: Investment amount at 300,000 x 22% = $66,000, Number of shares: 66,000/97 = 680 shares.

+ Venture Associates: Investment amount at 300,000 - 66,000 - 165,000 = $69,000, Number of shares = 69,000/5 = 13,800 shares.

- After share price changes:

a. New value of the portfolio = Gold Finger value + Moosehead value + Venture Associates value = 7,174 x 32 + 680 x 66 + 3 x 13,800 = $315,848.

b. Return on the portfolio = (Value of the portfolio after price changes - Value of the portfolio before price changes) - 1 = (315,848 / 300,000) - 1 = 5.28%.

c. New portfolio weights:

+ Gold Finger: 7,174 x 32 / 315,848 = 73%

+ Moosehead: 680 x 66 / 315,848 = 14%

+ Venture Associates: 13,800 x 3 / 315,848 = 13%