Solved

An Investor Has $80,000 to Invest in Three Stocks, Stock

Question 42

Short Answer

An investor has $80,000 to invest in three stocks, stock A costs $100, stock B costs $120 and stock C costs $80. Each stock A has a risk factor of 8, each stock B has a risk factor of 10 and each stock C has a risk factor of 7. The investor believes that the sum of the risk factors for all stocks purchase should not exceed 6000. The projected annual growth rate for the three stocks are 9%, 13% and 8% respectively. The projected annual dividend income from these stocks are as follows: Stock A: $14/stock, Stock B: $15/stock, and Stock C: $20/stock. The investor desires an annual dividend income of $10,000. The investor has established the following goals in order of their importance:

(1) The investor believes that the budget cannot be exceeded. (d1)
(2) The risk factor should not exceed the target amount of 6000. (d2)
(3) The average annual growth rate in stock prices must be at least 10%. (d3)
(4) The investor desires a dividend income of at least $10,000. (d4)

-Write the risk factor constraint

Correct Answer:

verifed

Verified

8A + 10B + 7C + d

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents