You have $17,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $17,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 10.5 percent. If your goal is to create a portfolio with an expected return of 12.53 percent, how much money will you invest in Stock X and Stock Y?

You have $17,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 10.5 percent. If your goal is to create a portfolio with an expected return of 12.53 percent, how much money will you invest in Stock X and Stock Y?

Explanation / Answer

let proportion invested in X = w

w*14+(1-w)*10.5 = 12.53

3.5w = 12.53-10.5

w = 2.03/3.5

invested in X= 17000*2.03/3.5 = $ 9860

invested in Y = 17000-9860 = $ 7140

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