Replies to post #45214 on A.I.M. Users Bulletin Board (AIMUSERS)

[Vitaali]

Re: Help with Equation. Hi AIMStudent!

Thank you for taking a shot at this problem. I think you confused buying shares with selling shares. Your solution to the problem was selling shares, and I’m looking to buy shares to reduce extra cash. Let me clarify. When I have cash reserve at 59% cash to stock ratio, and want it to drop to 43.5%, I don’t want to sell shares. That would only increase extra cash and raise the cash to stock ratio %. I want to buy more shares to reduce extra cash.

When I’m talking about 59% cash reserve, I refer to cash to stock ratio. 59% in cash $1,179.80 and 41% in stock $819.81. If cash to stock ratio is 0% then for me it means I have $0 in cash and $1,999.61 in stock. (I hope this is how other people interpet this too.) If I want cash reserve to drop to 43.5%, I want cash to decrease from $1,179.80 to $885.50, and stock value to increase from $819.81 to $1,149.42. This would put cash to stock ratio right at 43.5%

As I input in my spreadsheet the numbers for buying new share amount at a specific price, the Cash to stock ratio changes automatically. Thus by trial and error, I concluded that I would need to spend $294.30 to buy 22.5 shares at $13.08 to get to that cash to stock ratio of 43.5%. I just don’t have the equation to get these figures.

My spreadsheet calculates the new stock price and adjusts the portfolio value accordingly. So that’s why $1,149.42 - $819.81 doesn’t equal the spent amount of $294.30, but instead $329.61. The stock price increased from the previous line of $12.54 to current $13.08.

I hope this makes sense to you AIMStudent.

Vitali

[Vitaali]

Re: Help with Equation. Hi AIMStudent!

You can disregard my previous reply to your answer. I looked closer to your solution and figured it out. I changed sell to buy and it worked great. I can adapt this equation to whether cash reserve needs to be higher or lower. I'll just subtract larger number from the smaller.

What threw me off initially with your equation is the fact that the price in my spreadsheet had changed from the previous sell and the numbers were a little off. But like always your math is still top notch. Thank you for your help!

Vitali