You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 12.2 percent. Assume D has an expected return of 15.7 percent, F has an expected return of 11.6 percent, and the risk-free rate is 6.35 percent. If you invest $50,000 in Stock D, how much will you invest in Stock F? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Amount of Stock F to buy

You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 12.2 percent. Assume D has an expected return of 15.7 percent, F has an expected return of 11.6 percent, and the risk-free rate is 6.35 percent. If you invest $50,000 in Stock D, how much will you invest in Stock F? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Amount of Stock F to buy

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You want to invest $45,000 in a portfolio with a beta of no more than 1.44 and an expected return of 14.3%. Bay Corp. has a beta of 0.83 and an expected return of 10.8%, and City Inc. has a beta of 1.9 and an expected return of 16.98%. The risk-free rate is 6%. You can invest in Bay Corp. and City Inc. How much will you invest in each?
Stock A has expected return of 10 percent per year and stock B has expected return of 20 percent. If 40 percent of a portfolio funds are invested in stock A and the rest in stock B. What is the expected return on the portfolio of stock A and Stock B? (please state the formula and show your workings)
One of our clients, Mr. Choi, currently has an investment portfolio value of $1mil. His portfolio consists of 70% risky portfolio and 30% risk-free asset. If Mr. Choi has now extra $100,000 cash to invest, and if he is a constant relative risk aversion, how do you think he wants to allocate his extra $100,000 over the risky and the risk-free asset? Assume that Mr. Choi’s utility is a power function with gamma= 2 If another client, Mr. Smith, also has a power utility function but has a larger risk preference parameter value of gamma than Mr. Choi does, how does Mr. Smith want his money to be allocated relative to Mr. Choi?
A stock that you interested in has a beta of 5.the total value of your portfolio is $200000and you decide to invest another $50000in the stock. The current beta of your portfolio is2.5what will be the beta of your new portfolio? The risk free rate is 6%and the expected return on market is 15%what is the expected return on your new portfolio?
Suppose you are thinking of purchasing the Moore Co.’s common stock today. If you expect Moore to pay $2.5, $2.625, $2.73, and $2.81 dividends at the end of year one, two, three, and four respectively and you believe that you can sell the stock for $40.97 at the end of year four. If you required return on this investment is 9%, how much will you be willing to pay for the stock today?
You have a $2 million portfolio consisting of a $100,000 investment in eachof 20 different stocks. The portfolio has a beta of 1.1. You are consideringselling $100,000 worth of one stock with a beta of 0.9 and using the proceedsto purchase another stock with a beta of 1.4. What will the portfolio’s newbeta be after these transactions?
You are considering investing $1,000 in a T-bill that pays 4% and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 30% and 70%, respectively. X has an expected rate of return of 13% and a standard deviation of 20%, and Y has an expected rate of return of 10% and a standard deviation of 14%. If you want to form a portfolio with an expected rate of return of 10%, what percentages of your money must you invest in the T-bill, X, and Y. respectively, if you keep X and Y in the same proportions to each other as in portfolio P? [Select] If the correlation coefficient between X and Y is 0.15 then what is the standard deviation of the complete portfolio? [Select]
An investor invests 75% of his wealth in a risky asset with an expected rate of return of 28% and a standard deviation of 30% and 25% in a treasury bill that pays 3%. What is the EXPECTED RETURN of the combined portfolio of t-bills and the risky asset?
Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $75,000with a probability of 25%, $125,000 with a probability of 50%, or $140,000 with a probability of 25%.The alternative risk-free investment in T-bills pays 4% per year. a) If you require a risk premium of 8%, how much will you be willing to pay for the portfolio?b) What is the Sharpe ratio of the portfolio if you can purchase it at the price calculated above?
Jamie has wealth of $10,000 to invest. The market portfolio consists of three stocks with 20% being Stock A, 40% being Stock B and the remainder Stock C. The expected return on this market portfolio is 14%. The risk free rate is 5%. The CAPM holds. Suppose Jamie's optimal portfolio has an expected return of 23%, what are the dollar values of her investments in A, B. C and the risk free asset?
Suppose you buy 200 shares of Dolby Laboratories at $30 per share and 100 shares of Coca-Cola at $40 per share. If Dolby’s share price goes up to $36 and Coca-Cola’s falls to $38, what is the new value of the portfolio, and what return did it earn? After the price change, what are the portfolio weights?
Give typing answer with explanation and conclusion

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