You have $150,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 14.1 percent. Stock X has an expected return of 12.93 percent and a beta of 1.42 and Stock Y has an expected return of 8.51 percent and a beta of .74. I found the Beta of portfolio to be 1.60 and that is correct I need to find how much I invest in Stock Y. I come up with an answer of -$39,616.25. And yet that answer seems to be incorret. All solutions and equations point to that as the solution. Need some help please.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
You have $150,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 14.1 percent. Stock X has an expected return of 12.93 percent and a beta of 1.42 and Stock Y has an expected return of 8.51 percent and a beta of .74.
I found the Beta of portfolio to be 1.60 and that is correct
I need to find how much I invest in Stock Y. I come up with an answer of -$39,616.25. And yet that answer seems to be incorret. All solutions and equations point to that as the solution. Need some help please.
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