Question

You have $30,000 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 9 percent.

   

Required:

(a)	If your goal is to create a portfolio with an expected return of 12.4 percent, how much money will you invest in Stock X?
	$74,400 $19,380 $21,216 $21,420 $20,400

  

(b)	If your goal is to create a portfolio with an expected return of 12.4 percent, how much money will you invest in Stock Y?
	$9,600 $10,080 $9,216 $9,120 $9,984

Answer 1

Let investment in X=$x

Hence investment in Y=(30000-x)

Portfolio return=Respective return*Respective weight

12.4=(x/30000*14)+(30000-x)/30000*9

(12.4*30000)=14x+(30000-x)*9

372000=14x+270,000-9x

x=(372000-270,000)/(14-9)

=$20400=investment in X

Hence investment in Y=(30000-20400)=$9600.