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A winner of the Texas Lotto has decided to invest $50,000 per year in the stock market. Under consideration are
A winner of the Texas Lotto has decided to invest $50,000 per year in the stock market. Under consideration are
stocks for a petrochemical firm and a public utility. Although a long-range goal is to get the highest possible return, some consideration is given to the risk involved with the stocks. A risk index on a scale of 1-10 (with 10 being the most risky) is assigned to each of the two stocks. The total risk of the portfolio is found by multiplying the risk of each stock by the dollars invested in that stock.
The following table provides a summary of the return and risk:
STOCK RETURN RISK
PetrochemicalUtilityInvestmentOL50, 600- 21Risk94ReturnOverall Risk =921 + 4 ( 50, 00 0 - 24)Overall Risk should be less than 6 ( index)So921 + 209000 - 401 5 505000 x 6 = 300000501 5...
