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:

John Maynard Keynes

A British economist whose theories on government intervention in the economy (Keynesian economics) have greatly influenced modern economic and political policies.

Government Expenditures

The money spent by the government in a specific period on public services, infrastructure, defense, welfare, and other areas.

Fascists

Members or supporters of a political ideology that exalts nation and often race above the individual, characterized by dictatorial power, centralized autocracy, and forcible suppression of opposition.

National Identity

The sense of a being part of a collective based on shared characteristics, culture, language, and history.