Question

You have $22,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 13 percent. If your goal is to create a portfolio with an expected return of 11.74 percent, how much money will you invest in Stock X? In Stock Y?

Answer 1

Answer:

The answer is "$ 8.140".

Explanation:

The two stock portfolio formula is as follows:  

Return portfolio = weightage 1 * Return expected 1 + weightage 2 * Return expected 2  

weightage 2 = 1-weightage 1 Return portfolio  = weightage 1 * Return expected 1+ (1-weightage 1) * Return expected b  

Replacement of data and resolution of fo weigtage 1,  

11.74% = weights of 1 * 11% + (1-weights of 1)*13%    

weights of 1 * 2% = 13% -11.74% = 1.26%  

Weightage Stock 1 = 0.63  

weightage 2 = 1-weightage 1 = 0.37  

In 22,000 dollars, 63% invest in stocks X $13.860 and 37% in 8.140 dollars.