Question

You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 12.5 percent and Stock Y with an expected return of 9.5 percent. Assume your goal is to create a portfolio with an expected return of 11.2 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.) Investment in Stock X Investment in Stock Y

Answer 1

LET THE INVESTMETNT IN X BE $ X
INVESTMENT IN Y = 10000 - $X
TOTAL RETURN =	RETURN ON X + RETURN ON Y
10000 * 11.2% =	$X * 12.5% + (10000 - $X) * 9.5%
1120 =	3% * $X + 950
$X =	(1120 - 950) / 3%
$X =	5666.666667
INVESTMENT IN X =	$ 5666.67
INVESTMENT IN Y =	10000 - INVESTMENT IN X
	$ 10000 - $ 5666.67
	$ 4333.33