Answer:$3684 should be invested in stock L
Step-by-step explanation:
Let x represent the amount that you should invest in stock K.
Let y represent the amount that you should invest in stock L.
You have $10,000 to invest in these two stocks. It means that
x + y = 10000
Stock K is expected to return 12.4 percent while the return on Stock L is expected to be 8.6 percent. It means that the returns from stock K would be 12.4/100 × x = 0.124x
And the returns from stock L would be 8.6/100 × y = 0.086y
if you desire a combined return from the two stocks of 11 percent, it means that the combined returns would be
11/100 × (x + y) = 0.11(x + y)
The equation would be
0.124x + 0.086y = 0.11(x + y)- - - - - - - -1
Substituting x = 10000 - y into equation 1, it becomes
0.124(10000 - y) + 0.086y = 0.11(10000 - y + y)
1240 - 0.124y + 0.086y = 1100
- 0.124y + 0.086y = 1100 - 1240
- 0.038y = - 140
y = - 140/- 0.038
y = 3684
