Victoria Beckham is a financial advisor who manages money for high-networth individuals. For a particular client, Victoria recommends the following portfolio of stocks.
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Global Recording Artists (GRA)
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Soccer Intl. (SI)
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Liquid Oxygen Corp. (LO)
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Viva Mfg. (VM)
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Wannabe Travel (WT)
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Shares
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8,000
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9,000
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7,000
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10,500
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4,000
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Price per share Portfolio weights
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$40
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$36
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$45
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$30
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$60
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a. Calculate the portfolio weights implied by Ms. Beckham's recommendations. What fraction of the portfolio is invested in GRA and SI combined?
b. Suppose that the client purchases the stocks suggested by Ms. Beckham, and a year later the prices of the five stocks are as follows: GRA($60), SI($50), LO($38), VM($20), WT($50). Calculate the portfolio weights at the end of the year. Now what fraction of the portfolio is held in GRA and SI combined?