Question

You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 13 percent and Stock Y with an expected return of 8 percent. Your goal is to create a portfolio with an expected return of 12.4 percent. All money must be invested. How much will you invest in stock X? A. $800B. $1,200C. $4,600D. $8,800E. $9,200

Answer 1

The money invested in stock X is $8,800.

Given,

Total investment in stock portfolio=$10000

Expected return from stock X=13%=0.13

Expected return from stock Y=8%=0.08

Expected return from portfolio=12.4%=0.124

The portfolio return is calculated by taking the weighted average of individual stock returns.

Let x represent the portfolio weightage of stock X.

1-x is the portfolio weightage of stock Y.

money invested in stock X be

0.124=0.13x+0.08(1-x)

0.124=0.13x+0.08-0.08x

0.124-0.08=0.05x

0.044=0.05x

x=0.88

money invested in stock X=0.88*10000=$8800

Thus, the money invested in stock X is $8,800.

To learn more about percentages refer here

https://brainly.com/question/26718419

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