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 13 percent and Stock Y with an expected return of 9 percent. If your goal is to create a portfolio with an expected return of 11.2 percent, how much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations. Round your answer to the nearest dollar, e.g., 32.)

You have $14,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 13 percent and Stock Y with an expected return of 9 percent. If your goal is to create a portfolio with an expected return of 11.2 percent, how much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations. Round your answer to the nearest dollar, e.g., 32.)

Explanation / Answer

Wx+Wy = 1

Rp = Rx×Wx+Ry×Wy

11.2% = 13%×Wx+9%×(1-Wx)

Wx = 55%

Wy = 45%

Stock X = $14,000×55% = $7,700

Stock Y = $14,000×45% = $6,300

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