1. Total capital means:
Market value of stocks + Other investments
2. Original investment:
$10+$90 = $100
2. As per question:
Market value of stocks + Other investments:
$15.9+ $90 = $105.9
15.9 is 15% of 105.9
That is: [(15.9/105.9)*100] = 15%
3. What the question says is that in the above situation, sell stocks of market value of $5.9 so that the weight of stocks in the total portfolio is restored to 10% ,i.e.:
$10 + $90 = $100 .
- Profit- take sell : if a stocks portfolio weighting reachs 15 per cent of the total capital then sell it down to restore the portfolil weighting of 10 per cent of total capital
