Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have $97,346 to invest in two stocks and the risk-free security. Stock A has an expected return of 12.45 percent and Stock B has

You have $97,346 to invest in two stocks and the risk-free security. Stock A has an expected return of 12.45 percent and Stock B has an expected return of 11.95 percent. You want to own $26,541 of Stock B. The risk-free rate is 5.55 percent and the expected return on the market is 11.98 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.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

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

Step: 2

blur-text-image_step_2

Step: 3

blur-text-image_step3

Ace Your Homework with AI

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

Get Started

Recommended Textbook for

Modern Portfolio Theory and Investment Analysis

Authors: Edwin Elton, Martin Gruber, Stephen Brown, William Goetzmann

9th edition

ISBN: 9781118805800, 1118469941, 1118805801, 978-1118469941

More Books

Students also viewed these Finance questions