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You have $15,000 to invest and would like to create a portfolio with an expected return of 10.1 percent. You can invest in Stock K with an expected return of 8.8 percent and Stock L with an expected return of 12.4 percent. How much will you invest in Stock K

Respuesta :

Answer:

$9,583.33

Explanation:

The computation of the amount invested in the stock K is shown below

Let us assume the amount invested in stock K be Y

So according to this, following formula should be used

The Expected return of portfolio × Amount invested = Expected return of K × Amount invested in K + Expected return of L × Amount invested in L

0.101 × $ 15,000 = 0.088 × Y + 0.124 × ( $ 15,000 - Y )

$1,515 = 0.088Y + $ 1,860 - 0.124Y

0.036Y = $ 345

Y = $ 345 ÷ 0.036

= $9,583.33

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