Problem:
You have $200,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 11.85 percent. Stock X has an expected return of 10.39 percent and a beta of 1.26, and Stock Y has an expected return of 7.01 percent and a beta of .74.
Required:
Question 1: How much money will you invest in stock X?
Question 2: What is the beta of your portfolio?
Note: Explain all calculation and formulas.