Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You decided to invest your wealth of $10,000 in a portfolio of three stocks. You also decided to sell stock 1 short and collect $3,000.
You decided to invest your wealth of $10,000 in a portfolio of three stocks. You also decided to sell stock 1 short and collect $3,000. After the short sale you will invest $8,000 of your cash in stock 2 and the remainder in stock 3. The expected rate of return of stock 2 is R2= 18% and of stock 3 is R3= 22%. What should the rate of return on stock 1 be for the portfolio rate of return to equal 19%?
a.-6.22%
b.9.88%
c.26.44%
d.21.33%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started