Consider a world that only consists of the three stocks shown in the following table: a. Calculate

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Consider a world that only consists of the three stocks shown in the following table:

Consider a world that only consists of the three stocks

a. Calculate the total value of all shares outstanding currently.
b. What fraction of the total value outstanding does each stock make up?
c. 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 yourportfolio?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Corporate Finance

ISBN: 978-0133097894

3rd edition

Authors: Jonathan Berk and Peter DeMarzo

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