A portfolio has three stocks 110 shares of Yahoo (YHOO), 210 Shares of General Motors (GM), and 70 shares of Standard and Poorʹs Index Fund (SPY). If the price of YHOO is $20, theprice of GM is $20, and the price of SPY is $130, calculate the portfolio weight of YHOO andGM. A) 10.6%, 13.5%B) 9.9%, 25.7%C) 13.5%, 24.4%D) 14.2%, 27.1%

Option (D) is correct.

Explanation:

Value of Yahoo:

= Shares * Price

= 110 shares * $20

= $2,200

Value of General Motors (GM):

= Shares * Price

= 210 shares * $20

= $4,200

Value of Standard and Poorʹs Index Fund (SPY):

= Shares * Price

= 70 shares * $130

= $9,100

Total value = Value of Yahoo + Value of GM + Value of SPY

= $2,200 + $4,200 + $9,100

= $15,500

Therefore,

Portfolio weight of YHOO:

= Value of YAHOO : Total value

= $2,200 : $15,500

= 0.1419 or 14.19%

Portfolio weight of GM:

= Value of GM : Total value

= $4,200 : $15,500

= 0.2709 or 27.09%

Therefore, the portfolio weight of YHOO and GM are 14.2% (approx) and 27.1% (approx), respectively.