Use the Information for the Question(s)below

question 2

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 minimum volatility that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:

• A)20%.
• B)25%.
• C)22%.
• D)18%.

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Definitions:

Labor

The deployment of human manpower, both in physical form and intellectual capacity, for generating goods and services.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, clearing the market.

Interest Rate

The percentage of a loan amount charged by the lender to the borrower for the use of money, calculated on an annual basis.

Gnome Molds

The forms or templates used for the creation of gnome figurines, typically made from materials like plastic, silicone, or metal.