You have $15,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $15,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 9 percent. Assume 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 answers to 2 decimal places (e.g., 32.16).)

You have $15,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 9 percent. Assume 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 answers to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Let investment in stock X = x Then investment in stock Y - 15000 - X WeIghtaGe of X = x / 15000 Weightage of Y = (15000 - x) / 15000 Expected return = Expected return of X * weightage of X + Expected return of Y * Weightage of Y Therefore from above equation we get, .1265 = x/15000 * .15 +(15000 -x)/15000 *0.0 9 .1265 = .00001x + (15000 - x) * 0.000006 .1265 = .00001x + 0.09 -0.000006x .1265 - 0,09 = 0.000004x Hence x = 0.0365/0.000004                  = 9125 Hence investment in stock    = 9125 Investment in Stock Y = 15000 - 9125= 5875

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