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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.
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. If x 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 x? 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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