Use the Information for the Question(s)below

question 12

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 volatility of his portfolio,then the maximum expected return that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:

• A)13%.
• B)15%.
• C)16%.
• D)12%.

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Definitions:

Rinzai School

A sect of Zen Buddhism that emphasizes kensho (seeing one's true nature) and zazen (meditation) as the path to enlightenment, known for its use of koans.

Kano School

A dominant style of Japanese painting from the late 15th century to the 19th century, characterized by vivid colors and bold brush strokes, founded by Kano Masanobu.

Soto School

A school of Zen Buddhism that emphasizes meditation and the practice of zazen as a means to enlightenment, founded by Dogen in Japan.

Zen Buddhism

A form of Buddhism that emphasizes meditation and intuition rather than ritual worship or study of scriptures.