You have $12,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $12,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 8 percent. If your goal is to create a portfolio with an expected return of 9.59 percent, how much money will you invest in Stock X ? In Stock Y? (Do not round intermediate calculations.)

You have $12,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 8 percent. If your goal is to create a portfolio with an expected return of 9.59 percent, how much money will you invest in Stock X ? In Stock Y? (Do not round intermediate calculations.)

Explanation / Answer

Expected return = R1*P1 + R2*P2

9.59% = X*.11 + (1 - x)*.08

.0959 = .11x + .08 - .08x

x = .0159/.03

x = .53

Amount to be invest in stock X = 12000 * 53% = 6360

Amount to be invest in stock Y = 12000 * 47% = 5640

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