You have a total of $40,000 to invest in Stock A, Stock B and a risk...

You have a total of $40,000 to invest in Stock A, Stock B and a risk free asset. You must invest all of your money. Your objective is to construct a portfolio that has an expected return of 11% and is only 75% as risky as the overall market. If Stock A has a beta of 1.4 and an expected return of 16%, Stock B has a beta of 1.1 and an expected return of 15%, and the risk free rate is 2%, how much money will you invest in the risk free asset?

Expert Solution

Calculating The weights of each stock and Risk free asset. it means the amount that to be investment in them. The equations are as follows

x + y + z = 1
1.4 x + 1.1 y = 0.75
16 x + 15 y + 2 z = 11

Solution, x = -0.05357 ; y = 0.75 ; z = 0.3036

Step 6: solve for x by substituting y = 0.75 and z = 0.3036 into the rst equation.

Using the Above weights, the amount to be invested in each security is 40000*(-.05357)= 2142.80 is to be sold of Stock A

40000*.75=30000 to be invested in Stock B

40000*.3036=12144 to be invested in Risk Free security

ekkarill92 answered 2 years ago

You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You...

You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 11.4 percent. If D has an expected return of 13.6 percent, F has an expected return of 9.7 percent, the risk-free rate is 3.8 percent, and you invest $50,000 in Stock D, how much will you invest in Stock F?

You have $100,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free...

You have $100,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. You goal is to create a portfolio that has an expected return of 13% and that has only 70% of the risk of the overall market. If X has an expected return of 31% and a beta of 1.8, Y has an expected return of 20% and a beta of 1.3, and the risk-free rate is...

You invest $2000 in stock A and $2000 in stock B. The two stocks have betas...

You invest $2000 in stock A and $2000 in stock B. The two stocks have betas of 1.2 and 1.4. What is the beta of the portfolio? A. .95 B. 1.01 C. 1.20 D. 1.30 E. 1.40

You have $91471 to invest in two stocks and the risk-free security. Stock A has an...

You have $91471 to invest in two stocks and the risk-free security. Stock A has an expected return of 10.99 percent and Stock B has an expected return of 11.09 percent. You want to own $29063 of Stock B. The risk-free rate is 3.76 percent and the expected return on the market is 12.08 percent. If you want the portfolio to have an expected return equal to that of the market, how much should you invest (in $) in the...

You have $96433 to invest in two stocks and the risk-free security. Stock A has an...

You have $96433 to invest in two stocks and the risk-free security. Stock A has an expected return of 12.84 percent and Stock B has an expected return of 10.23 percent. You want to own $30572 of Stock B. The risk-free rate is 4.69 percent and the expected return on the market is 12.04 percent. If you want the portfolio to have an expected return equal to that of the market, how much should you invest (in $) in the...

You have $76250 to invest in two stocks and the risk-free security. Stock A has an...

You have $76250 to invest in two stocks and the risk-free security. Stock A has an expected return of 10.7 percent and Stock B has an expected return of 11.1 percent. You want to own $30664 of Stock B. The risk-free rate is 3.78 percent and the expected return on the market is 12.87 percent. If you want the portfolio to have an expected return equal to that of the market, how much should you invest (in $) in the...

You have $93395 to invest in two stocks and the risk-free security. Stock A has an...

You have $93395 to invest in two stocks and the risk-free security. Stock A has an expected return of 11.39 percent and Stock B has an expected return of 9.25 percent. You want to own $34661 of Stock B. The risk-free rate is 4.2 percent and the expected return on the market is 12.78 percent. If you want the portfolio to have an expected return equal to that of the market, how much should you invest (in $) in the...

you have $100 to invest in two different investment projects, A and B, the total returns...

you have $100 to invest in two different investment projects, A and B, the total returns from which (TR and TR) are given below. the cost of purchasing a unit of investment in each project is $10 per unit. your problem is to invest the $100 in the two invest the $100 in the two investments so as to maximize your total return (for example, if you invested the entire $100 in investment B, you would receive a total return...

Say you have $10,000 to invest and you invest $4,000 in stock A and the rest...

Say you have $10,000 to invest and you invest $4,000 in stock A and the rest in stock B. You know that the expected returns of stocks A and B are .2 and .1, respectively. If the correlation coefficient between the returns of the two assets is .67, find out the expected portfolio returns a. 15% b. 14% c. 16% d. Can not be determined

in your two-stock portfolio, you invest $25 in stock a and $75 in stock B. if...

in your two-stock portfolio, you invest $25 in stock a and $75 in stock B. if the beta of stock A is 1.31 and the beta of stock b is 1.39 your portfolio wold be:

Question