A stock market comprises 2300 shares of stock A and 2300 shares of stock B. The share prices for stocks A and B are $20 and $10, respectively. What proportion of the market portfolio is comprised of each stock? A. Stock A is 66.7% and Stock B is 33.3% B. Stock A is $46,000 and Stock B is $23,000 C. Stock A is 200% and Stock B is 100% O D. Stock A is 33.3% and Stock B is 66.7%
A stock market comprises 2300 shares of stock A and 2300 shares of stock B. The share prices for stocks A and B are $20 and $10, respectively. What proportion of the market portfolio is comprised of each stock? A. Stock A is 66.7% and Stock B is 33.3% B. Stock A is $46,000 and Stock B is $23,000 C. Stock A is 200% and Stock B is 100% O D. Stock A is 33.3% and Stock B is 66.7%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![### Understanding Market Portfolio Proportions
A stock market comprises 2300 shares of stock A and 2300 shares of stock B. The share prices for stocks A and B are $20 and $10, respectively. What proportion of the market portfolio is comprised of each stock?
1. **Stock A is 66.7% and Stock B is 33.3%**
2. **Stock A is $46,000 and Stock B is $23,000**
3. **Stock A is 200% and Stock B is 100%**
4. **Stock A is 33.3% and Stock B is 66.7%**
---
When evaluating the proportion of a market portfolio comprised of different stocks, it’s essential to understand the valuation of each stock and how it contributes to the total portfolio value. This problem requires calculating the total market value of each stock and then determining how much each stock contributes to the overall market value.
### Calculations:
**1. Determine the market value of each stock:**
- Stock A: 2300 shares * $20 per share = $46,000
- Stock B: 2300 shares * $10 per share = $23,000
**2. Find the total market value of the portfolio:**
\[
\text{Total Market Value} = (\text{Value of Stock A}) + (\text{Value of Stock B}) = \$46,000 + \$23,000 = \$69,000
\]
**3. Calculate the proportion of each stock in the portfolio:**
- Proportion of Stock A:
\[
\frac{\$46,000}{\$69,000} \approx 0.6667 \text{ or } 66.7\%
\]
- Proportion of Stock B:
\[
\frac{\$23,000}{\$69,000} \approx 0.3333 \text{ or } 33.3\%
\]
### Conclusion:
The correct answer is:
**A. Stock A is 66.7% and Stock B is 33.3%**
Understanding these calculations helps in grasping essential concepts in portfolio management, such as proportional holdings and market valuation, which are critical for making informed investment decisions.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6c0554f3-a7d8-4c12-8db7-464a17f00206%2Fc72fc329-5f4f-46e1-8596-68c3bab0b439%2Fpbc7ypl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Understanding Market Portfolio Proportions
A stock market comprises 2300 shares of stock A and 2300 shares of stock B. The share prices for stocks A and B are $20 and $10, respectively. What proportion of the market portfolio is comprised of each stock?
1. **Stock A is 66.7% and Stock B is 33.3%**
2. **Stock A is $46,000 and Stock B is $23,000**
3. **Stock A is 200% and Stock B is 100%**
4. **Stock A is 33.3% and Stock B is 66.7%**
---
When evaluating the proportion of a market portfolio comprised of different stocks, it’s essential to understand the valuation of each stock and how it contributes to the total portfolio value. This problem requires calculating the total market value of each stock and then determining how much each stock contributes to the overall market value.
### Calculations:
**1. Determine the market value of each stock:**
- Stock A: 2300 shares * $20 per share = $46,000
- Stock B: 2300 shares * $10 per share = $23,000
**2. Find the total market value of the portfolio:**
\[
\text{Total Market Value} = (\text{Value of Stock A}) + (\text{Value of Stock B}) = \$46,000 + \$23,000 = \$69,000
\]
**3. Calculate the proportion of each stock in the portfolio:**
- Proportion of Stock A:
\[
\frac{\$46,000}{\$69,000} \approx 0.6667 \text{ or } 66.7\%
\]
- Proportion of Stock B:
\[
\frac{\$23,000}{\$69,000} \approx 0.3333 \text{ or } 33.3\%
\]
### Conclusion:
The correct answer is:
**A. Stock A is 66.7% and Stock B is 33.3%**
Understanding these calculations helps in grasping essential concepts in portfolio management, such as proportional holdings and market valuation, which are critical for making informed investment decisions.
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