Answer:
1. Investment in X = $6900
2. Investment in Y = $3,100
Explanation:
Since the total weight of a portfolio must equal 1 (100%), the weight of Stock Y mustbe one minus the weight of Stock X. Mathematically speaking, this means:
E(RP) = .1085 = .115wX + .094(1 – wX)
.1085 = .115wX + .094 – .094wX
.0145 = .021wX
wX = 0.69
So, the dollar amount invested in Stock X is the weight of Stock X times the total portfolio value, or:
Investment in X = 0.69 ($10,000) = $6,900
And the dollar amount invested in Stock Y is:
Investment in Y = (1 – 0.69)($10,000) = $3,100
