You have $12,000 to invest and would like to create a portfolio with an expected return of 9.75 percent. You can invest in Stock K with an expected return of 8.05 percent and Stock L with an expected return of 11.7 percent. How much will you invest in Stock K?

$5,589.04

$7,452.05

$4,890.41

$5,876.71

$6,410.96

Question

Giovani Manning

Business

30 December, 20:19

You have $12,000 to invest and would like to create a portfolio with an expected return of 9.75 percent. You can invest in Stock K with an expected return of 8.05 percent and Stock L with an expected return of 11.7 percent. How much will you invest in Stock K?

$5,589.04

$7,452.05

$4,890.41

$5,876.71

$6,410.96

+4

Answers (1)

Know the Answer?

Duchess · Answer 1

Correct option is $6410.96

Explanation:

Let investment in K=$x

Hence investment in L = (12000-x)

Portfolio return=Respective return*Respective weights

9.75 = (x/12000*8.05) + (12000-x) / 12000*11.7

(9.75*12000) = 8.05x+140400-11.7x

117000=8.05x+140400-11.7x

x = (140400-117000) / (11.7-8.05)

=$6410.96 (Approx) = investment in K