You have 10000 to invest in a stock portfolio Your choices a

You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 11 percent. Assume your goal is to create a portfolio with an expected return of 12.4 percent. Required: How much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount (e.g., 1,234,567).) Investment in Stock x Investment in Stock Y

Solution

Let investment in X=$x

Hence investment in Y=(10000-x)

Portfolio return=Respective return*Respective weights

12.4=(x/10000*14)+(10000-x)/10000*11

12.4*10000=14x+110,000-11x

x=(124000-110,000)/(14-11)

=$4667=investment in X

Investment in Y=(10000-4667)=$5333(Approx).