Use the Information for the Question(s)below

question 34

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 amount that Tom should invest in the market portfolio to minimize his volatility is closest to:

• A)100%
• B)90%
• C)125%
• D)110%

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Definitions:

VIE Theory

A psychological theory that suggests individual motivation is determined by the perceived valence, instrumentality, and expectancy of the outcome.

Instrumentality

In motivation theory, it refers to the perceived relationship between performing at a certain level and achieving a particular outcome.

Sales Clerk

An employee typically found in retail settings responsible for processing sales transactions, assisting customers, and managing inventory.

Incentives

Forms of motivation aimed to encourage people towards certain behaviors or actions by offering rewards.