You have $96,055 to invest in two stocks and the risk-free security. Stock A has an expected return of13.11 percent and Stock B has an expected return of 11.11 percent. You want to own $32,861 ofStock B. The risk-free rate is 5.72 percent and the expected return on the market is 12.96 percent. Ifyou want the portfolio to have an expected return equal to that of the market, how much should youinvest (in $) in the risk-free security? Answer to two decimals. (Hint: A negative answer is OK - it meansyou borrowed (rather than lent or invested) at the risk free rate.)

The investment in stock B is $32,861 from the total value of investment is $96,055. Remaining…

Answered: You have $96,055 to invest in two…

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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