Use the Information for the Question(s)below

question 38

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 amount that Tom should invest in the market portfolio to maximize his expected return is closest to:

• A)72%
• B)92%
• C)110%
• D)140%

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Definitions:

Cognitive Control

The ability of the mind to regulate its own processes in directing attention, making decisions, and inhibiting unwanted behaviors or thoughts.

Electrical Signals

Impulses used for communication within organisms, particularly in the nervous system and muscles.

Stereotypic Thoughts

Simplified and generalized beliefs about a group of people that often underlie prejudiced attitudes.

Negative Outcomes

Refers to results or consequences that are undesirable, harmful, or counter to what is intended or expected.