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 13 percent and Stock Y with an expected return of 11 percent. Assume your goal is to create a portfolio with an expected return of 12.15 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 $17,000 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 11 percent. Assume your goal is to create a portfolio with an expected return of 12.15 percent.

Explanation / Answer

Let weight of investment in stock x=x

Thus weight of investment in stock y = (1-x)

Expected return =weight of x *return of x+ weight of y *return of y

12.15=x*13 +(1-x)*11

12.15=13x+11-11x

x = (12.15-11)/2=0.575=57.5%

Investment in stock X=57.5%

Investment in stock Y =100-57.5=42.5%

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