Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have $89,721 to invest in two stocks and the risk-free security. Stock A has an expected return of 11.33 percent and Stock B has

image text in transcribed

image text in transcribed

You have $89,721 to invest in two stocks and the risk-free security. Stock A has an expected return of 11.33 percent and Stock B has an expected return of 11.22 percent. You want to own $33,368 of Stock B. The risk-free rate is 5.33 percent and the expected return on the market is 10.78 percent. If you want the portfolio to have an expected return equal to that of the market, how much should you invest in $) in the risk-free security? Answer to two decimals. (Hint: A negative answer is OK - it means you borrowed (rather than lent or invested) at the risk free rate.) You have $280,262 to invest in a stock portfolio (this amount is your original wealth). Your choices are Stock H, with an expected return of 15.92 percent, and Stock L, with an expected return of 10.92 percent. Legal constraints require you to invest at least $36,162 in stock L. If your goal is to create a portfolio with an expected return of 20.15 percent on your original wealth, what is the minimum amount you must borrow (and subsequently repay) at the risk free rate of 2.64 percent to achieve your goal? Answer in $ to two decimals

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions