ANSWER WITH WORKING QUESTION 26 PLEASE

Asset Stock A Stock B Stock C Risk-free asset Investment $185,000 $320,000 Beta .85 1.13 1.29 CHALLENGE (Questions 25-28) 25. Analyzing a Portfolio [LO2, 4] You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 13.6 percent. If Stock X has an expected return of 11.4 percent and a beta of 1.25, and Stock Y has an expected return of 8.68 percent and a beta of.85, how much money will you invest in Stock Y? How do you interpret your answer? What is the beta of your portfolio? 26. Systematic versus Unsystematic Risk [LO3] Consider the following information about Stocks I and II: Probability of State of Economy State of Economy Recession Normal Irrational exuberance Rate of Return if State Occurs Stock Stock II - 25 The market risk premium is 8 percent, and the risk-free rate is 4 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is "riskier"? Explain. 27. SML [LO4] Suppose you observe the following situation: Expected Return Security Pete Corp. Repete Co. Beta 1.21 83 .1079 .0843 553