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:

Angina Pectoris

A condition marked by severe chest pain due to insufficient blood supply to the heart, often associated with coronary artery disease.

Myocardium

The muscular tissue of the heart, responsible for contracting and pumping blood throughout the body.

Pericardial Sac

The Pericardial Sac, or pericardium, is a double-layered membrane that surrounds the heart, providing it with protection and lubrication.

Papillary Muscles

Muscles located in the ventricles of the heart, attaching to the cusps of the atrioventricular valves via chordae tendineae and preventing valve inversion.