You are considering how to invest part of your retirement savings. You have decided to put $ 400 comma 000 into three stocks: 51 % of the money in GoldFinger (currently $ 20 /share), 19 % of the money in Moosehead (currently $ 90 /share), and the remainder in Venture Associates (currently $ 6 /share). Suppose GoldFinger stock goes up to $ 38 /share, Moosehead stock drops to $ 60 /share, and Venture Associates stock rises to $ 13 per share.

a. What is the new value of the portfolio? b. What return did the portfolio earn?

The new value of the portfolio = $698266.4

The return that the portfolio earn = 74.57%

Explanation:

GIven that;

Retirement amount = $400,000

Number of shares in GoldFinger = 51% of the 400,000/20

Number of shares in GoldFinger = 0.51 * 400000/20

Number of shares in GoldFinger = 10,200

Number of shares in Moosehead = 19% of 400,000/90

Number of shares in Moosehead = 0.19 * 400000/90

Number of shares in Moosehead = 844.44

Number of shares in Venture Associates = (1 - (51%+19%) of 400000/6

Number of shares in Venture Associates = (1 - (0.70) * 400000/6

Number of shares in Venture Associates = 0.30 * 400000/6

Number of shares in Venture Associates = 20000

∴

(a)

The new value of the portfolio = (10200 * 38) + (844.44 * 60) + (20000 * 13)

The new value of the portfolio = $698266.4

(b) the return that the portfolio earn = (new value of the portfolio - retirement savings) / retirement savings

the return that the portfolio earn = (698266.4 - 400000) / 400000

the return that the portfolio earn = 0.7457

the return that the portfolio earn = 74.57%