You have $14,000 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 8 percent. Assume your goal is to create a portfolio with an expected return of 11.35 percent. How much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

Question

Business

Andres

7 November, 23:17

You have $14,000 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 8 percent. Assume your goal is to create a portfolio with an expected return of 11.35 percent. How much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

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Answers (1)

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Davenport · Answer 1

Investment in stock x = $7816.67

Investment in stock y = $6183.33

Explanation:

The computation of invest in Stock X and Stock Y is shown below:-

Let the weight be x

x * 14% + (1 - x) * 8%

= 11.35%

0.14x + 0.08 - 0.08x

= 0.1135

0.14x - 0.08x

= 0.1135 - 0.08

0.06x = 0.335

x = 0.335 : 0.06

x = 55.83%

Investment in stock x = x * Stock portfolio

= 55.83% * $14,000

= $7816.67

Investment in stock y = 1 - 0.5583 * $14,000

= $6183.33