Wendell invests $10,000 in a stock portfolio made up of Petroleum Special at $30 per share, Newshoe at $12 per share, and Beans and Sprouts at $2.50 per share. He places 60 percent of the money in P.S. (Petroleum Special), 30 percent in N (Newshoe), and 10 percent in B & S (beans and Sprouts). With market values changing (P.S. down $3.12, N up 80 percent, and B & S up $0.20), what is his portfolio worth 6 months later?
The word problem is included in the book: Basic Biomechanics, 6th edition
by Susan J. Hall;
ISBN#978-0-07-337644-8
The course name: Biomechanics
just work with the facts presented:
60% = 6000 @ $30 = 200 shares
30% = 3000 @ $12 = 250 shares
10% = 1000 @ $2.50 = 400 shares
now figure the changes in value:
200(-3.12) = -624.00
250(.80*12) = +2400
400(0.20) = +80.00
. . .
Well, Wendell certainly knows how to diversify his investments! Let's crunch some numbers and find out how his portfolio is doing.
First, let's calculate how many shares of each stock Wendell bought:
- Petroleum Special (P.S.): $6,000 (60% of $10,000) / $30 = 200 shares
- Newshoe (N): $3,000 (30% of $10,000) / $12 = 250 shares
- Beans and Sprouts (B & S): $1,000 (10% of $10,000) / $2.50 = 400 shares
Now, let's calculate the value of each stock after 6 months:
- P.S. (Petroleum Special): $30 - $3.12 = $26.88 per share
- N (Newshoe): $12 + (80% * $12) = $12 + $9.60 = $21.60 per share
- B & S (Beans and Sprouts): $2.50 + $0.20 = $2.70 per share
Finally, let's calculate the current value of each stock in Wendell's portfolio:
- P.S. (Petroleum Special): 200 shares * $26.88 = $5,376
- N (Newshoe): 250 shares * $21.60 = $5,400
- B & S (Beans and Sprouts): 400 shares * $2.70 = $1,080
Adding up the current values of each stock, Wendell's portfolio is worth:
$5,376 + $5,400 + $1,080 = $11,856
So after 6 months, Wendell's portfolio is worth $11,856. That's a pretty good return on his investment, and hopefully, it puts a smile on his face too!
To calculate the value of Wendell's portfolio 6 months later, we need to calculate the change in value for each stock and then determine the updated value for each stock. Let's break it down step-by-step:
Step 1: Determine the initial investment in each stock.
Wendell invested 60% of the money in Petroleum Special (P.S.), which is 60% of $10,000.
Initial investment in P.S. = 0.6 * $10,000 = $6,000.
He invested 30% in Newshoe (N), which is 30% of $10,000.
Initial investment in N = 0.3 * $10,000 = $3,000.
He invested 10% in Beans and Sprouts (B & S), which is 10% of $10,000.
Initial investment in B & S = 0.1 * $10,000 = $1,000.
Step 2: Calculate the change in value for each stock.
P.S. is down $3.12 per share, so the change in value per share is - $3.12.
N is up 80%, so the change in value per share is $12 * 80% = $9.60.
B & S is up $0.20 per share, so the change in value per share is $0.20.
Step 3: Calculate the updated value for each stock.
The number of shares of each stock is determined by dividing the initial investment in each stock by the initial price per share.
Number of P.S. shares = Initial investment in P.S. / Price per share of P.S. = $6,000 / $30 = 200 shares.
Updated value of P.S. = Number of P.S. shares * (Price per share of P.S. + Change in value per share) = 200 * ($30 - $3.12) = $5,776.
Number of N shares = Initial investment in N / Price per share of N = $3,000 / $12 = 250 shares.
Updated value of N = Number of N shares * (Price per share of N + Change in value per share) = 250 * ($12 + $9.60) = $5,400.
Number of B & S shares = Initial investment in B & S / Price per share of B & S = $1,000 / $2.50 = 400 shares.
Updated value of B & S = Number of B & S shares * (Price per share of B & S + Change in value per share) = 400 * ($2.50 + $0.20) = $1,080.
Step 4: Calculate the total value of the portfolio.
Total value after 6 months = Updated value of P.S. + Updated value of N + Updated value of B & S
= $5,776 + $5,400 + $1,080 = $12,256.
Therefore, Wendell's portfolio is worth $12,256 after 6 months.
To calculate Wendell's portfolio worth 6 months later, we need to consider the changes in the market values of each stock in his portfolio.
Let's first calculate the amount of money allocated to each stock:
Petroleum Special (P.S.):
Wendell allocated 60% of the money, which is $10,000 * 0.6 = $6,000
The market value of P.S. has decreased by $3.12, so the new market value per share is $30 - $3.12 = $26.88
Therefore, the number of shares he owns in P.S. is $6,000 / $26.88 = 223.21 shares (rounded to the nearest whole share)
Newshoe (N):
Wendell allocated 30% of the money, which is $10,000 * 0.3 = $3,000
The market value of N has increased by 80%, so the new market value per share is $12 * 1.8 = $21.60
Therefore, the number of shares he owns in N is $3,000 / $21.60 = 138.89 shares (rounded to the nearest whole share)
Beans and Sprouts (B & S):
Wendell allocated 10% of the money, which is $10,000 * 0.1 = $1,000
The market value of B & S has increased by $0.20, so the new market value per share is $2.50 + $0.20 = $2.70
Therefore, the number of shares he owns in B & S is $1,000 / $2.70 = 370.37 shares (rounded to the nearest whole share)
Next, let's calculate the current value of each stock:
Current value of P.S. = 223 shares * $26.88 per share = $5,996.64
Current value of N = 139 shares * $21.60 per share = $3,002.40
Current value of B & S = 370 shares * $2.70 per share = $999.00
Now, let's calculate the total worth of Wendell's portfolio:
Total worth = Current value of P.S. + Current value of N + Current value of B & S
Total worth = $5,996.64 + $3,002.40 + $999.00
Total worth = $9,998.04
Therefore, Wendell's portfolio is worth approximately $9,998.04 after 6 months.