Question

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

Answer 1

Correct option is $6410.96

Step-by-step 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