Use the Information for the Question(s)below

question 112

Multiple Choice

Use the information for the question(s) below.
Tom's portfolio consists solely of an investment in Merck stock.Merck has an expected return of 13% and a volatility of 25%.The market portfolio has an expected return of 12% and a volatility of 18%.The risk-free rate is 4%.Assume that the CAPM assumptions hold in the market.
-Assuming that Tom wants to maintain the current expected return on his portfolio,then the amount that Tom should invest in the market portfolio to minimize his volatility is closest to:

• A)100%.
• B)90%.
• C)125%.
• D)113%.

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Definitions:

Cultural Norms

Common norms and guidelines that determine how individuals act within societal groups.

Anger

Intense irritation or anger, often leading to feelings of antagonism.

Sadness

A mood defined by experiences of sadness, regret, or despair.

Plutchik's Theory

A psychoevolutionary theory of emotion which proposes eight primary emotions and their interrelations, emphasizing the adaptive and evolutionary functions of emotions.