You Currently Own $100,000 Worth of Walmart Stock

question 14

Essay

You currently own $100,000 worth of Walmart stock.Suppose that Walmart has an expected return of 14% and a volatility of 23%.The market portfolio has an expected return of 12% and a volatility of 16%.The risk-free rate is 5%.Assuming the CAPM assumptions hold,what alternative investment has the lowest possible volatility while having the same expected return as Walmart? What is the volatility of this portfolio?

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Definitions:

Products Liability

The area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.

Express Warranty

An explicit guarantee by a seller to a buyer that a product or service meets certain quality and performance standards.

Sample

A small part or quantity intended to show what the whole is like.

Selective Perception

The process by which individuals perceive what they want to in media messages while ignoring opposing viewpoints.