Suppose you have $4,000 to invest in Stocks X and Y.Stock X has an expected return of 13.5 percent and a beta of 1.2.Stock Y has an expected return of 18 percent and a beta of 2.How much should you invest in Stock X if you wish to have a portfolio beta of 1.8?
A) $1,000
B) $1,750
C) $2,250
D) $2,500

Question

Quizplus · Accepted Answer

Weight in stock X=(1.8-2)/(1.2-2)=0.25
Amount in stock X = $4,000 F1F1F1S1F1F1F10 0.25 = $1,000

Suppose You Have $4,000 to Invest in Stocks X and Y.Stock