Raghubhai You have $116,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is tocreate a portfolio that has an expected return of 17.8 percent. Stock X has an expectedreturn of 13.4 percent and a beta of 1.30, and Stock Y has an expected return of 7.9percent and a beta of .80.a. How much money will you invest in Stock Y? (Do not round intermediatecalculations. A negative answer should be indicated by a minus sign.)b. What is the beta of your portfolio? (Do not round intermediate calculations andround your answer to 3 decimal places, e.g., 32.161.)a. Investment in Stock Yb. Portfolio beta

To solve this problem, we need to use the concept of the Capital Asset Pricing Model (CAPM) and the…

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 15MC

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You have $122,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 17.6 percent. Stock X has an expected return of 14.0 percent and a beta of 1.26, and Stock Y has an expected return of 9.5 percent and a beta of 1.00. 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 the nearest whole number, e.g., 32.) b. What is the beta of your portfolio?
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You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below: Asset Investment Beta Stock A $ 147,000 .92 Stock B $ 133,000 1.37 Stock C 1.52 Risk - free asset How much will you invest in Stock C? How much will you invest in the risk - free asset? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
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