A popular value-weighted index is constructed out of shares in the two companies shown in the table,below.On Day 1 you construct a portfolio that mimics the index.In order for your portfolio to earn the same return as the index from Day 2 to Day 3,what portfolio weight do you need for Company 1 on Day 2?
Definitions:
Net Present Value
A method used in capital budgeting to evaluate the profitability of an investment by calculating the present value of all future cash flows minus the initial investment cost.
Simulation Analysis
is a method used in risk management to model possible outcomes of a decision by manipulating variables within mathematical or computer simulations.
NPV Estimates
Projections or calculations of the Net Present Value for different investments or projects to aid in decision-making.
Simulation Analysis
A technique used to predict the outcome of a project or investment by running multiple simulations with various sets of assumptions.
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