You have $14,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $14,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 8 percent. Assume your goal is to create a portfolio with an expected return of 11.35 percent.

How much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)

You have $14,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 8 percent. Assume your goal is to create a portfolio with an expected return of 11.35 percent.

Explanation / Answer

Answer:

Let the weight be x

x*14%+(1-x)*8% = 11.35%

0.14x + 0.08-0.08x = .1135

0.14x-0.08x = .1135-0.08

0.06x = 0.335

x = 0.335/0.06

x = 55.83%

Investment in stock x = 55.83%*14000 = 7816.67

Investment in stock y = 1-0.5583 * 14000 = 6183.33

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