A discrete-time financial market has two risky securities, whose prices are S1 (0) = Question 1. 10 and S2(0) = 20 at time t = 0. The security prices change to S,(1) = 8 and S2(1) = 24 at time t = 1. Consider a portfolio that consists of the two securities with weights w = 30% and wz = 70% initially and the portfolio is worth 100 at time t = 0. (a) Find the shares of security 1 and security 2 held in the portfolio. (b) Compute the value V(1) of the portfolio at time t = 1. (c) Find the return of the portfolio.
A discrete-time financial market has two risky securities, whose prices are S1 (0) = Question 1. 10 and S2(0) = 20 at time t = 0. The security prices change to S,(1) = 8 and S2(1) = 24 at time t = 1. Consider a portfolio that consists of the two securities with weights w = 30% and wz = 70% initially and the portfolio is worth 100 at time t = 0. (a) Find the shares of security 1 and security 2 held in the portfolio. (b) Compute the value V(1) of the portfolio at time t = 1. (c) Find the return of the portfolio.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Question 1.
A discrete-time financial market has two risky securities, whose prices are S1 (0) =
10 and S2(0) = 20 at time t = 0. The security prices change to S1(1) = 8 and S2(1) = 24 at time t = 1.
Consider a portfolio that consists of the two securities with weights w = 30% and wz = 70% initially and
the portfolio is worth 100 at time t = 0.
(a) Find the shares of security 1 and security 2 held in the portfolio.
(b) Compute the value V(1) of the portfolio at time t = 1.
(c) Find the return of the portfolio.
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