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27 March, 00:39

Consider a portfolio that includes the following two companies: Company 1 Company 2 Day Price Number of Shares Price Number of Shares 1 $8.00 750 $13.00 1 comma 300 2 $8.93 750 $13.08 1 comma 300 On Day 1 the portfolio has weights which are equal to the value of each company's shares relative to the total value of both companies. What is the portfolio weight for Company 1?

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  1. 27 March, 04:01
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    26.20%

    Explanation:

    Total value of shares of Company 1:

    = $8 x 750

    = $6,000

    Total Value of shares of Company 2:

    = $13 x 1,300

    = $16,900

    Total Value of both companies = $6,000 + $16,900

    = $22,900

    Now, on Day 1 weights are equal to total value of share of Company 1 divided by Total value of both companies.

    Weight of Company 1 = $6,000 / $22,900

    = 0.2620

    = 26.20%
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