An Investor Owns $2,000 of Adobe Systems Stock, $4,000 of Dow

question 85

Multiple Choice

An investor owns $2,000 of Adobe Systems stock, $4,000 of Dow Chemical, and $6,000 of Office Depot. What are the portfolio weights of each stock?

• A) Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333
• B) Adobe System = 0.1667, Dow Chemical = 0.3333, Office Depot = 0.5
• C) Adobe System = 0.3333, Dow Chemical = 0.1667, Office Depot = 0.5
• D) Adobe System = 0.2, Dow Chemical = 0.4, Office Depot = 0.6

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Definitions:

Capital Budgeting Analysis

Capital budgeting analysis is the process of evaluating and selecting long-term investments that are in alignment with the goal of a company's shareholders' wealth maximization.

Opportunity Cost

The cost of choosing one option over another, representing the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Stand-Alone Principle

A method of evaluating a project or investment by analyzing its viability and potential profitability as if it were the only project the company is undertaking.

Incremental Costs

Additional costs that a company incurs when increasing production or undertaking new projects.