Answered: Explain portfolio weight

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 14QTD

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Explain portfolio weight

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Portfolio is a group of financial assets or investments, such as stocks, bonds, and cash. Portfolios are generally held by an investor, hedge fund, or a type of financial institution.

Portfolio Weight

The weight of a portfolio is just the proportion of an investment portfolio that is held by a single asset.

Let's think of the weight of a portfolio in terms of bread slices. If you have 8 slices of bread and the total value of the bread is $20, then each slice of bread will hold a weight of 12.5%.

$20 / 8 slices = $2.50 which is the value for each slice. Then ($2.50 / $20) *100 = 12.5%, the percentage weight for each slice by dollar value.

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