You have $12,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $12,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 8.0 percent. If your goal is to create a portfolio with an expected return of 9.59 percent, how much money will you invest in Stock X and Stock Y?

You have $12,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 8.0 percent. If your goal is to create a portfolio with an expected return of 9.59 percent, how much money will you invest in Stock X and Stock Y?

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Let the amount of Investment in X be X

Let the amount of Investment in Y be (12000 - X)

Expected Return = Expected Return of X*Weight of X + Expected Return of Y*Weight of Y

9.59 = 11*X/12000 + 8*(12000 - X)/12000

9.59*12000 = 11X + 96000 - 8X

X = (115080 - 96000)/3 = $6360

Y = 12000 - 6360 = $5640

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Thanks.

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