Question
You have $100,000 to invest in a portfolio containing stock X and Stock Y and a risk free asset. You must invest all of your
You have $100,000 to invest in a portfolio containing stock X and 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 10.7% and has only 80 percent of the risk of the overall market. Ifx has an expected return of 10.7 percent and a beta of 1.8, Y has and expected return of 8.75 percent and a beta of 0.5 and the risk-free rate is 7%, how much money will you invest in stock ? Express answer in percent and in dollar amounts . How do you interpret your answer ? Show that the resulting portfolio has the required return and beta values.
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