Assume you have a total of $200,000 to invest in two corporate stocks identified as Z1 and Z2. The overall rate of return you require on the $200,000 is 26% per year. (a) If $40,000 is invested in Z2 with an estimated * 2Zi of 14% per year, what value must * 1Zi exceed to realize at least 26% per year? (b) If the best return expected from the Z1 stock is 27%, determine the threshold level of investment in Z2 to maintain an overall ROR of 26% per year. Solve by hand or using Goal Seek, as instructed.
What will be an ideal response?
(a) 40,000(0.14) + (200,000 – 40,000)(i* Z1 ) = 200,000(0.26)
i* Z1 = 0.29 (29% per year)
(b) Goal Seek results are shown. Thresehold investment in Z2 is $15,385. Any more than
$15,385, and the overall ROR falls below 26%.
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Indicate whether the statement is true or false.
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A) 1 B) 4 C) 3 D) 2
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