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Safari File Edit View History Bookmarks Window Help 57%)T, Fri Nov 24 2:02 PM ED Q E ezto.mheducation.com FINANCE Chapter 11 EOCP instructions I help Question 7 (of 7) Save & Exit 1 . Submit 16.00 points You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 11.9 percent. Assume D has an expected return of 15.4 percent, F has an expected return of 11.3 percent, and the risk-free rate is 6.2 percent. If you invest $50,000 in Stock D, how much will you invest in Stock F? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Amount of Stock F to buy References eBook& Resources Worksheet Learning Objective: 11-01 Calculate expected returns Difficulty: 3 Challenge Section: 11.7 The Security Market Line Check my work

Explanation / Answer

you have invested 50000 in D, then assume invest in F=F and then invest in risk free asset=100000-50000-F=50000-F

(50000/100000)*15.4%+(F/100000)*11.3%+((50000-F)/100000)*6.2%=11.9%

7.7%+(F/100000)*11.3%+((50000-F)/100000)*6.2%=11.9%

(F/100000)*11.3%+((50000-F)/100000)*6.2%=11.9%-7.7%

(F/100000)*11.3%+((50000-F)/100000)*6.2%=4.20%

F*11.3%+(50000-F)*6.2%=4.20%*100000

F*5.1%+3100=4200

F=1100/5.1%

F=21568.63 is the answer

the above is the answer

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