You have $20,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 12 percent. If your goal is to create a portfolio with an expected return of 11.39 percent, how much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations and round your answer to the nearest dollar, e. g., 32.)

Investment in stock X  $12200

Investment in stock Y  $7800

Explanation:

The portfolio return is made up of individual stock returns multiplied by their weight in the portfolio. Thus, the formula for portfolio return is,

Portfolio Return = Weight of Stock X * rX + Weight of Stock Y * rY

Where rX and rY are returns of stock X and stock Y.

To calclate weight, we plug in numbers in the formula,

Let x be the investment in stock X, then investment in stock Y is 1-x.

0.1139 = x * 0.11 + (1-x) * 0.12

0.1139 = 0.11x + 0.12 - 0.12x

0.1139 - 0.12 = -0.01x

x = -0.0061 / -0.01

x = 0.61

Then 1 - x is 1 -0.61 = 0.39

So investment in stock X is 20000 * 0.61 = $12200

Investment in stock Y is 20000 * 0.39 = $7800

support your answer using the data presented. (5 points). 4. based on the information you used to schedule and curve, which product would you recommend the shoe hut focus on, and why? provide details that support your answer. (5 points).

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