You have $15,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $15,000 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 7 percent.

If your goal is to create a portfolio with an expected return of 10 percent, how much money will you invest in Stock X?

If your goal is to create a portfolio with an expected return of 10 percent, how much money will you invest in Stock Y?

You have $15,000 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 7 percent.

Explanation / Answer

Now the equation is given as follows:

X* 0.14 + (1-X)*0.07 =0.10

Where "X" is the amount of money in percentage terms to be invested in Stock X

0.14X + 0.07-0.07X = 0.10

0.07X = 0.03

X = 0.42857

Hence You will invest 0.42857*15000 = $6,428.57 in stock X - (a)

And you will invest 15000 - 6428.57 = $8,571.43 in Stock Y - (b)

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