You have $122,000 to invest in a portfolio containing Stock X, Stock Y, and a ri

Question

You have $122,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 14 percent and that has only 72 percent of the risk of the overall market. If X has an expected return of 41 percent and a beta of 1.8, Y has an expected return of 21 percent and a beta of 1.4, and the risk-free rate is 7 percent, how much money will you invest in Stock Y? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.)

You have $122,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 14 percent and that has only 72 percent of the risk of the overall market. If X has an expected return of 41 percent and a beta of 1.8, Y has an expected return of 21 percent and a beta of 1.4, and the risk-free rate is 7 percent, how much money will you invest in Stock Y? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.)

Explanation / Answer

X Y Z(risk free) 41% 21% 7% 14% Portfolio Return 1.8 1.4 0 0.66641 Portfolio Beta 2.10% 44.90% 53.00% 1 proportion 2561.268 54779.78 64658.95 amount invested

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