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Homework answers / question archive / Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share

Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share

Finance

Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 20%, and Abbott Labs has a return of -10%. The weight on Ball Corporation in your portfolio after one year is closest to: Select one:

a. 20.0%

b. 21.7%

c. 20.7%

d. 12.5%

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The weight is computed as follows:

= Amount of investment in Ball / Total amount of investment

Amount of investment in Ball is computed as follows:

= Number of shares x Price per share x (1 + return)

= 100 x $ 40 x 1.125

= $ 4,500

Total amount of investment is computed as follows:

= Number of shares ABT x Price per share x (1 + return) + Number of shares of LOW x Price per share x (1 + return) + Number of shares of BLL x Price per share x (1 + return)

= 200 x $ 50 x (1 - 0.10) + 200 x $ 30 x (1 + 0.20) + 100 x $ 40 x (1 + 0.125)

= $ 9,000 + $ 7,200 + $ 4,500

= $ 20,700

So, the weight is as follows:

= $ 4,500 / $ 20,700

= 21.7%

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