Consider a world that only consists of the three stocks shown in the following table: (1)Calculate the total value of all shares outstanding currently.  (2)What fraction of the total value outstanding does each stock make up?  (3)You hold the market portfolio, that is, you have picked portfolio weights equal to the answer to part b (that is, each stock’s weight is equal to its contribution to the fraction of the total value of all stocks). What is the expected return of your 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
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Consider a world that only consists of the three stocks shown in the following table:

(1)Calculate the total value of all shares outstanding currently. 
(2)What fraction of the total value outstanding does each stock make up? 
(3)You hold the market portfolio, that is, you have picked portfolio weights equal to the answer to part b (that is, each stock’s weight is equal to its contribution to the fraction of the total value of all stocks). What is the expected return of your portfolio?

Total Number of
Current Price per
Stock
Shares Outstanding
Share
Expected Return
First Bank
100 Million
$100
18%
Fast Mover
50 Million
$120
12%
Funny Bone
200 Million
$30
15%
Transcribed Image Text:Total Number of Current Price per Stock Shares Outstanding Share Expected Return First Bank 100 Million $100 18% Fast Mover 50 Million $120 12% Funny Bone 200 Million $30 15%
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