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25 June, 03:40

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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  1. 25 June, 07:35
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    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
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