Use the Following Information to Answer the Question(s)below

question 80

Multiple Choice

Use the following information to answer the question(s) below.
Your investment portfolio consists of $10,000 worth of Google stock.Suppose that the risk-free rate is 4%,Google stock has an expected return of 14% and a volatility of 35%,and the market portfolio has an expected return of 12% and a volatility of 18%.Assume that the CAPM assumptions hold.
-What alternative investment has the highest possible expected return while having the same volatility as Google?

• A)-25% in the risk-free asset and +125% in the market portfolio
• B)-20% in the risk-free asset and +120% in the market portfolio
• C)-94% in the risk-free asset and +194% in the market portfolio
• D)6% in the risk-free asset and +94% in the market portfolio

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Definitions:

World Bank

An international financial institution that provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects.

International Monetary Fund

An international organization created to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.

World Trade Organization

An international organization established in 1995 to regulate international trade, aiming to ensure that trade flows as smoothly, predictably, and freely as possible.

Modernization Theory

A theory that argues that societies progress linearly from traditional to modern states and that economic development brings about positive social and cultural changes.