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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.

21.33%

b.

-6.22%

c.

26.44%

d.

9.88%

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