Use the Information for the Question(s)below

question 116

Essay

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.
-You currently own $100,000 worth of Wal-Mart stock.Suppose that Wal-Mart 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 Wal-Mart? What is the volatility of this portfolio?

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Definitions:

JFrame Class

The JFrame class is a type of container in Java Swing that functions as the main window where components are added to create a graphical interface.

Graphics Class

A class in Java used for drawing shapes, text, images or performing other graphical operations on components.

Dispose

A method often used to release system resources or to perform clean-up activities before an object is removed from memory.

JFrame

A class in the Java Swing library for creating and managing windows; it serves as the main frame for Java GUI applications.