You have $104,000 to invest in a portfolio containing Stock X and Stock Y. Your

Question

You have $104,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 19.1 percent. If Stock X has an expected return of 15.9 percent and a beta of 1.41, and Stock Y has an expected return of 12.9 percent and a beta of 1.03, you will have to invest $ ????(Do not include the dollar sign ($). Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16)) in Stock Y, and the beta of your portfolio is ???? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

(15.9x141)X +(1-X)(12.9x1.03)=19.1 Weight of X= 63.655 %, Y= 36.345% Amount invested in stock X= 63.655%x104000= $66201.2 Amount invested in stock Y=36.345%x104000= $37798.8 beta of portfolio=( 1.41x.63655)+(1.03x.36345)= 1.2719

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