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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. Your
- 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. Your goal is to create a portfolio that has an expected return of 1 percent and that has only 70 percent of the risk of the overall market. If X has an expected return of 1 percent and a beta of 1.8, Y has an expected return of 20 percent and a beta of 1.3, and the risk-free rate is 7 percent. (10 points)
- How much money will you invest in stock Y? (5 points)
- How do you interpret your answer? (5 points)
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