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Riley Stein estimates the expected returns for Cromarty LTD and Tindall Cos to be 7.3% and...

Riley Stein estimates the expected returns for Cromarty LTD and Tindall Cos to be 7.3% and 12.10% respectively. She wants to build a portfolio with an expected return of 9.90%. The weight of Cromarty in the portfolio should be:

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Expert Solution

Expected return of Cromarty, Rc = 7.3%

Expected return of Tindall Cos, Rt = 12.10%

Expected return on Portfolio, Rp = 9.9%

Let W be the weight of Cromarty, then Weight of Tindall is (1-W)

W * 7.3% + (1-W)* 12.1% = 9.9%

7.3 W +12.1 - 12.1 W = 9.9

W = 0.45833 = 45.83%= Weight of Cromarty in Portfolio

jeff jeffy answered 2 years ago
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