You have $19,000 to invest in a stock portfolio. Your choices are Stock X with a

Question

You have $19,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 10 percent. Assume your goal is to create a portfolio with an expected return of 13.15 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 $19,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 10 percent. Assume your goal is to create a portfolio with an expected return of 13.15 percent.

Explanation / Answer

Total value to invest = $19,000

Return on stock X = 15%

Return on stock Y = 10%

Expected return = 13.15%

Dollar value of expected return = $19,000 × 13.15%

                                                   = $2,498.50

Let’s Assume investor has invested X amount in stock X and ($22,000 – X) Amount in stock Y.

So,

$2,498.50 = 15% × X + ($19,000 – X) × 10%

   5% × X = $2,860 - $2,523.40

             X = $11,970

So total money invested in stock X is $11,970.

Total amount invested in stock Y = $19,000 - $11,970

                                                       = $7,030

Hence, Total amount invested in stock X is $11,970 and stock Y is $7,030.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.