You have $30,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $30,000 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 9.0 percent. If your goal is to create a portfolio with an expected return of 10.42 percent, how much money will you invest in Stock X and Stock Y?

You have $30,000 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 9.0 percent. If your goal is to create a portfolio with an expected return of 10.42 percent, how much money will you invest in Stock X and Stock Y?

Explanation / Answer

10.42 = x*11+(1-x)*9

10.42-9 = 2x

x = 1.42/2 = .71

1-x = .29

amount invested in stock X = .71*30000 = $21300

amount invested in stock Y = .29*30000 = $8700

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