Reference no: EM13288714
Suppose that there are only three stocks in the market: Jazz, Inc., Classical, Inc., and Rock, Inc. Their outstanding shares and prices are shown in the table below. The risk-free rate is 2%. Assume that the market is efficient.
Security | O.S. | Price | Cap | Weight
Jazz Inc. | 10,000 | $6.00 | $60,000 | 3/20
Classical Inc. | 30,000 | $4.00 | $120,000 | 3/10
Rock, Inc. | 40,000 | $5.50 | $220,000 | 11/20
Suppose that the expected returns of Jazz, Classical, and Rock are 10%, 6%, and 12%, respectively. An investor who has $10,000 wants to achieve an expected return of 40%. How much money should she invest in each stock and the risk-free security?
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: Suppose that the expected returns of Jazz, Classical, and Rock are 10%, 6%, and 12%, respectively. An investor who has $10,000 wants to achieve an expected return of 40%. How much money should she invest in each stock and the risk-free security?
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