You have 100000 to invest in either Stock D Stock F or a ris

You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 10.5 percent. Assume D has an expected return of 13.2 percent, F has an expected return of 9.5 percent, and the risk-free rate is 3.8 percent Required: If you invest $50,000 in Stock D, how much will you invest in Stock F? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Amount of stock F to buy

Solution

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Weight Return Portfolio Return Stock D                 50,000.00                      0.50 13.20% 6.60% Stock F x x/100,000 9.50% Risk free asset 50000 -x .5 - x/100,000 3.80%               100,000.00 10.5% = 6.6% + 9.5%*x/100,000 + 1.90% - 3.80%*x/100,000 2% = .095x/100,000 - .038x/100,000 2% = .057x/100,000 2,000 = .057x x = 35,087.72 Amount of Stock F to Buy                 35,087.72 Risk free asset= 50000 - 35087.72                 14,912.28