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:

Intelligence Scores

Numerical measures obtained from cognitive tests aimed at assessing an individual's mental capacity and abilities compared to an average score.

Impulsivity

A tendency to act on a whim, displaying behavior characterized by little or no forethought, reflection, or consideration of the consequences.

Attentional Capabilities

The ability to focus and maintain concentration on specific stimuli or tasks, often varying in capacity among individuals.

Muscle Coordination

The ability to use different parts of the body together smoothly and efficiently in physical tasks.