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21 May, 04:24

You have $12,000 to invest and would like to create a portfolio with an expected return of 9.75 percent. You can invest in Stock K with an expected return of 8.05 percent and Stock L with an expected return of 11.7 percent. How much will you invest in Stock K?

$5,589.04

$7,452.05

$4,890.41

$5,876.71

$6,410.96

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  1. 21 May, 04:45
    0
    Correct option is $6410.96

    Explanation:

    Let investment in K=$x

    Hence investment in L = (12000-x)

    Portfolio return=Respective return*Respective weights

    9.75 = (x/12000*8.05) + (12000-x) / 12000*11.7

    (9.75*12000) = 8.05x+140400-11.7x

    117000=8.05x+140400-11.7x

    x = (140400-117000) / (11.7-8.05)

    =$6410.96 (Approx) = investment in K
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