You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is tocreate a portfolio that has an expected return of 12.1 percent. Stock X has an expectedreturn of 10.28 percent and a beta of 1.20, and Stock Y has an expected return of 7.52percent and a beta of .80.a.How much money will you invest in Stock Y? (A negative answer should be indicatedby a minus sign. Do not round intermediate calculations and round your answer to2 decimal places, e.g., 32.16.)b.What is the beta of your portfolio? (Do not round intermediate calculations and roundyour answer to 3 decimal places, e.g., 32.161.)a. Investment in Stock Yb. Portfolio beta Consider the following information about Stocks I and II:Rate of Return If StateOccursProbability of State of-EconomyState of EconomyStock IStock IIRecession.15.05-.21Normal70.18.10Irrational exuberance.15.07.39The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. (Do notround intermediate calculations. Enter your standard deviation answers as a percentrounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimalplaces, e.g., 32.16.)The standard deviation on Stock I's return ispercent, and the Stock I beta isThe standarddeviation on Stock Il's return ispercent, and the Stock II beta isTherefore, based on thestock's systematic risk/beta, Stockis riskier.

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You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.1 percent. Stock X has an expected return of 10.28 percent and a beta of 1.20, and Stock Y has an expected return of 7.52 percent and a beta of .80. a.How much money will you invest in Stock Y? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b.What is the beta of your portfolio? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g.., 32.161.) a. Investment in Stock Y b. Portfolio beta

You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.1 percent. Stock X has an expected return of 10.28 percent and a beta of 1.20, and Stock Y has an expected return of 7.52 percent and a beta of .80. a.How much money will you invest in Stock Y? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b.What is the beta of your portfolio? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g.., 32.161.) a. Investment in Stock Y b. Portfolio beta

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

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