You own three stocks: 600 shares of Apple Computer, 10,000 shares of Cisco Systems, and 5000 shares of Colgate-Palmolive. The current share prices and expected returns of Apple, Cisco, and Colgate-Palmolive are, respectively, $500, $20, $100 and 12%, 10%, 8%.
- a.What are the portfolio weights of the three stocks in your portfolio?
- b.What is the expected return of your portfolio?
- c.Suppose the price of Apple stock goes up by $25, Cisco rises by $5, and Colgate-Palmolive falls by $13. What are the new portfolio weights?
- d.Assuming the stocks' expected returns remain the same, what is the expected return of the portfolio at the new prices?