Answered

### Diversifying Portfolios Activity

(30 points total)

Directions: Answer all questions in complete sentences and show all work to receive full credit.

#### Part 1: Simulation (20 points)

A: You are given \[tex]$15,000 to invest in stocks. Research current stocks online and choose two in which to split your investment. Fill in the table below, using whole shares only (no fraction or decimal shares). Your total purchase value for the two stocks should be as close to \$[/tex]15,000 as possible. (2 points)

[tex]\[
\begin{array}{|c|c|c|c|c|}
\hline
\text{Name of Stock} & \text{Symbol} & \begin{array}{c} \text{Quantity of} \\ \text{Shares} \\ \text{Purchased} \end{array} & \begin{array}{c} \text{Purchase Price} \\ \text{per Share} \end{array} & \begin{array}{c} \text{Total Purchase} \\ \text{Value} \end{array} \\
\hline
& & & & \\
\hline
& & & & \\
\hline
\end{array}
\][/tex]

Total purchase value for both stocks =

B: Record the daily closing price of your stocks in the table below, either by monitoring your stocks live or by researching the 7-day historical data. (3 points)

[tex]\[
\begin{array}{|c|c|c|c|c|c|c|c|}
\hline
\begin{array}{c} \text{Name of} \\ \text{Stock} \end{array} & \begin{array}{c} \text{Closing} \\ \text{Price Day} \\ 1 \end{array} & \begin{array}{c} \text{Closing} \\ \text{Price Day} \\ 2 \end{array} & \begin{array}{c} \text{Closing} \\ \text{Price Day} \\ 3 \end{array} & \begin{array}{c} \text{Closing} \\ \text{Price Day} \\ 4 \end{array} & \begin{array}{c} \text{Closing} \\ \text{Price Day} \\ 5 \end{array} & \begin{array}{c} \text{Closing} \\ \text{Price Day} \\ 6 \end{array} & \begin{array}{c} \text{Closing} \\ \text{Price Day} \\ 7 \end{array} \\
\hline
& & & & & & & \\
\hline
& & & & & & & \\
\hline
\end{array}
\][/tex]

C: Determine the total profit or loss if all shares for both stocks are sold at the close of business on day 7. Assume a 1.5% brokerage fee. Show all calculations. (5 points)

D: Based on the closing price data for the week, determine the best individual day to sell each stock. (10 points)

---

Note: Make sure to clearly label each part of your work and provide detailed calculations where necessary.



Answer :

GinnyAnswer
### Part 1: Simulation (20 points)

#### A: Investment Distribution (2 points)

You are given [tex]$15,000 to invest in stocks. You choose two stocks and split your investment accordingly. Here is the table for the chosen stocks: \[ \begin{array}{|c|c|c|c|c|} \hline \text{Name of Stock} & \text{Symbol} & \text{Quantity of Shares Purchased} & \text{Purchase Price per Share} & \text{Total Purchase Value} \\ \hline \text{Stock A} & \text{A} & 50 & \$[/tex]200 & \[tex]$10,000 \\ \hline \text{Stock B} & \text{B} & 30 & \$[/tex]300 & \[tex]$9,000 \\ \hline \end{array} \] The total purchase value for both stocks is $[/tex]10,000 + [tex]$9,000 = $[/tex]19,000[tex]$. #### B: Daily Closing Prices (3 points) Below is the table recording the daily closing prices for a 7-day period: \[ \begin{array}{|c|c|c|c|c|c|c|c|c|} \hline \text{Name of Stock} & \text{Closing Price Day 1} & \text{Closing Price Day 2} & \text{Closing Price Day 3} & \text{Closing Price Day 4} & \text{Closing Price Day 5} & \text{Closing Price Day 6} & \text{Closing Price Day 7} \\ \hline \text{Stock A} & \$[/tex]205 & \[tex]$210 & \$[/tex]215 & \[tex]$210 & \$[/tex]220 & \[tex]$225 & \$[/tex]230 \\
\hline
\text{Stock B} & \[tex]$310 & \$[/tex]315 & \[tex]$320 & \$[/tex]310 & \[tex]$330 & \$[/tex]335 & \[tex]$340 \\ \hline \end{array} \] #### C: Total Profit or Loss (5 points) To find the total profit or loss, we need to follow these steps: 1. Calculate the total selling value for each stock at the end of Day 7: - For Stock A: \[ \text{Total Selling Value} = 50 \text{ shares} \times \$[/tex]230/\text{share} = \[tex]$11,500 \] - For Stock B: \[ \text{Total Selling Value} = 30 \text{ shares} \times \$[/tex]340/\text{share} = \[tex]$10,200 \] 2. Calculate the combined total selling value: \[ \text{Total Selling Value} = \$[/tex]11,500 + \[tex]$10,200 = \$[/tex]21,700
\]

3. Calculate the brokerage fee (1.5%):

[tex]\[ \text{Brokerage Fee} = 0.015 \times \$21,700 = \$325.5 \][/tex]

4. Calculate the total profit or loss:

[tex]\[ \text{Total Purchase Value} = \$19,000 \][/tex]

[tex]\[ \text{Total Profit or Loss} = \$21,700 - \$19,000 - \$325.5 \][/tex]

[tex]\[ \text{Total Profit or Loss} = \$2,374.5 \][/tex]

So, the total profit (or gain) is [tex]$2,374.5. #### D: Best Individual Day to Sell Each Stock (10 points) To determine the best individual day to sell each stock, we need to identify the day with the highest closing price for each stock: - For Stock A: - The highest closing price is $[/tex]230 on Day 7.
- Therefore, the best day to sell Stock A is Day 7.

- For Stock B:
- The highest closing price is [tex]$340 on Day 7. - Therefore, the best day to sell Stock B is Day 7. ### Summary: 1. Total Purchase Value: \$[/tex]19,000
2. Total Selling Value: \[tex]$21,700 3. Brokerage Fee: \$[/tex]325.5
4. Total Profit or Loss: \$2,374.5 profit
5. Best Day to Sell Stock A: Day 7
6. Best Day to Sell Stock B: Day 7