1. You have a $30,000 portfolio that consists of equal dollar investments in stocks A, B,...

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1. You have a $30,000 portfolio that consists of equal dollarinvestments in stocks A, B, and C, each with a current price of$25. After one year, stock A is worth $40, stock B is worth $30,and stock C is worth $12.50. You wish to rebalance the portfolio tomaintain equal dollar investments in each stock. How many shares ofeach stock do you buy and/or sell to rebalance the portfolio? Acommon behavioral hypothesis is that investors sell winners toosoon and hold losers too long. Are your rebalancing actionsconsistent with this hypothesis?

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Investment in stock A 300003 10000 No of shares A bought 1000025 400 Value of stock A after 1 year 40400 16000 Investment in stock B 300003 10000 No of shares B bought 1000025 400 Value See Answer

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1. You have a $30,000 portfolio that consists of equal dollarinvestments in stocks A, B, and C, each with a current price of$25. After one year, stock A is worth $40, stock B is worth $30,and stock C is worth $12.50. You wish to rebalance the portfolio tomaintain equal dollar investments in each stock. How many shares ofeach stock do you buy and/or sell to rebalance the portfolio? Acommon behavioral hypothesis is that investors sell winners toosoon and hold losers too long. Are your rebalancing actionsconsistent with this hypothesis?