Assume you have a total of $200,000 to invest in two corporate stocks identified as Z1 and Z2. The overall rate of return you require on the $200,000 is 26% per year. (a) If $40,000 is invested in Z2 with an estimated i * Z2 of 14% per year, what value must i * Z1 exceed to realize at least 26% per year? (b) If the best return expected from the Z1 stock is 27%, determine the threshold level of investment in Z2 to maintain an overall ROR of 26% per year. Solve by hand or using Goal Seek, as instructed.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Assume you have a total of $200,000 to invest in
two corporate stocks identified as Z1 and Z2. The
overall rate of return you require on the $200,000
is 26% per year.
(a) If $40,000 is invested in Z2 with an estimated
i * Z2 of 14% per year, what value must i * Z1 exceed
to realize at least 26% per year?
(b) If the best return expected from the Z1 stock
is 27%, determine the threshold level of investment
in Z2 to maintain an overall ROR of
26% per year. Solve by hand or using Goal
Seek, as instructed.

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