Question
In: Finance
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:
Solutions
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 agoRelated Solutions
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