You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. Yo

Question

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 11.6 percent. Assume D has an expected return of 15.1 percent, F has an expected return of 11 percent, and the risk-free rate is 6.05 percent.

If you invest $50,000 in Stock D, how much will you invest in Stock F? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Amount of stock F to buy:

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 11.6 percent. Assume D has an expected return of 15.1 percent, F has an expected return of 11 percent, and the risk-free rate is 6.05 percent.

If you invest $50,000 in Stock D, how much will you invest in Stock F? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Amount of stock F to buy:

Explanation / Answer

Expected return on portfolio= W1*R1+W2*R2+W3*R3

W1 % amount invested on D

R1 % return from D

so on for F and risk free asset

$50000 invested in Stock D which means 50% money is invested in D.

Now,

11.6%=0.5*15.1%+X*11%+(0.5-X)*6.05%

0.116=0.0755+0.11X+0.03025-0.0605X

0.01025=0.0495X

X=0.2071

X=20.71%

i.e $20710 to be invested in Stock F

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