You would like to invest $20,000 and have a portfolio expected return of 12 percent. You...

You would like to invest $20,000 and have a portfolio expected return of 12 percent. You are considering two securities, X and Y. X has an expected return of 20 percent and Y has an expected return of 10 percent. How much should you invest in stock X if you invest the balance in stock Y to achieve the 12 percent portfolio return?

a) $5,500
b)		$4,000
c)		$7,000
d)		$6,250

Expert Solution

b)

$4,000

Working:

Step-1:Calculation of weight of each investment

Suppose weight of investment in X is "w" and weight of investment in Y is "1-w".

Portfolio return	=	sum of weighted return
0.12	=	(w0.20)+((1-w)0.10)
0.12	=	0.20w+0.10-0.10w
0.12	=	0.10w+0.10
0.02	=	0.10w
w	=	0.20
1-w	=	0.80

Step-2:Calculation of investment in Stock X

Investment in X	=	Total investment	*	Weight of X
	=	$ 20,000	*	0.20
	=	$ 4,000

jeff jeffy answered 1 year ago

You have $17,200 to invest and would like to create a portfolio with an expected return...

You have $17,200 to invest and would like to create a portfolio with an expected return of 11 percent. You can invest in Stock K with an expected return of 9.9 percent and Stock L with an expected return of 13.5 percent. How much will you invest in Stock K? $10,949.07 $4,598.61 $7,007.41 $5,255.56 $11,944.44 Based on the following information, what is the standard deviation of returns? State of Economy Probability of State of Economy Rate of Return if State...

You have $15,000 to invest in a stock portfolio and a goal of an expected return...

You have $15,000 to invest in a stock portfolio and a goal of an expected return of 12.5 percent. You can choose between Stock E with an expected return of 14.3 percent and Stock F with an expected return of 10.5 percent. How much should you invest in each stock? Please show work in Excel sheet Portfolio Value $ 15,000 Stock E E(R) 14.30% Stock F E(R) 10.50% Portfolio E(R) 12.50% Weight of Stock X ? Weight of Stock Y...

QUESTION 62 1. You invest $100 in the market portfolio with an expected return of 12%...

QUESTION 62 1. You invest $100 in the market portfolio with an expected return of 12% and a standard deviation of 15%, and a T-bill that pays 5%. If you desire to form a portfolio with an expected return of 10%, what percentages of your money must you invest in the market portfolio? 45.3% 65.5% 71.4% 83.5% 85.24% 1 points QUESTION 63 1. The market portfolio has an expected return of 12% and a standard deviation of 20 %....

You have a portfolio worth $101,000 that has an expected return of 11.8 percent. The portfolio...

You have a portfolio worth $101,000 that has an expected return of 11.8 percent. The portfolio has $18,400 invested in Stock O, $26,200 invested in Stock P, with the remainder in Stock Q. The expected return on Stock O is 16.1 percent and the expected return on Stock P is 13 percent. What is the expected return on Stock Q?

You have a portfolio worth $86,000 that has an expected return of 11.2 percent. The portfolio...

You have a portfolio worth $86,000 that has an expected return of 11.2 percent. The portfolio has $17,800 invested in Stock O, $25,600 invested in Stock P, with the remainder in Stock Q. The expected return on Stock O is 15.5 percent and the expected return on Stock P is 12 percent. What is the expected return on Stock Q? Multiple Choice 8.92% 9.60% 10.27% 11.20% 12.97%

You have a three-stock portfolio. Stock A has an expected return of 16 percent and a...

You have a three-stock portfolio. Stock A has an expected return of 16 percent and a standard deviation of 41 percent, Stock B has an expected return of 20 percent and a standard deviation of 46 percent, and Stock C has an expected return of 15 percent and a standard deviation of 46 percent. The correlation between Stocks A and B is .30, between Stocks A and C is .20, and between Stocks B and C is .05. Your portfolio...

You have a three-stock portfolio. Stock A has an expected return of 17 percent and a...

You have a three-stock portfolio. Stock A has an expected return of 17 percent and a standard deviation of 38 percent, Stock B has an expected return of 20 percent and a standard deviation of 56 percent, and Stock C has an expected return of 15 percent and a standard deviation of 38 percent. The correlation between Stocks A and B is 0.30, between Stocks A and C is 0.20, and between Stocks B and C is 0.05. Your portfolio...

You are going to invest in the following portfolio: A and B A B Expected return...

You are going to invest in the following portfolio: A and B A B Expected return 12% 9% Standard deviation of returns 6% 3% Beta 1.2 .8 If you invest 75% in security A and they have a +0.35 correlation of returns, find; a. The expected return from the portfolio; and b. The standard deviation of returns from the portfolio.

You have $20,000 to invest in a stock portfolio. Your choices are Stock X with an...

You have $20,000 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. Required: (a) If your goal is to create a portfolio with an expected return of 10.1 percent, how much money will you invest in Stock X? A) $7,280 B) $7,350 C) $6,650 D) $7,000 E) $33,667 (b) If your goal is to create a portfolio with an...

Assume that you manage a risky portfolio with an expected rate of return of 12% and...

Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 44%. The T-bill rate is 5%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. What is the expected return of your client's portfolio? (Enter your answer as a decimal number rounded to four decimal places.) Expected return?

Question