You have $24,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $24,000 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 12 percent. If your goal is to create a portfolio with an expected return of 12.65 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 $24,000 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 12 percent. If your goal is to create a portfolio with an expected return of 12.65 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

Assume X and Y are weights of respective stocks.

X+Y = 1

X*13%+Y*12% = 12.65%

(1-Y)*13%+Y*12% = 12.65%

0.13-1%*Y = 12.65%

Weight of Y = 35% or $8,400

Weight of X = 65% (1-35%) or $15,600

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