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%

Assess the minimum price a firm would need to charge to cover its average total cost in the long run.

Distinguish between price searchers and price takers.

Evaluate the effect of market entry or exit on market supply, price and firm profitability.

Understand the relationship between market demand, firm entry/exit, and the supply curve in different cost industries.

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Definitions:

Common Stock

Equity ownership in a corporation, granting shareholders voting rights and a share in the company's profits via dividends, pertaining to the fundamental stake in the company’s equity.

Cash Dividend

A distribution of profits by a corporation to its shareholders in the form of cash.

Cash

Money in the form of coins or banknotes, especially that held by a person or business.

Stock Investments

Financial assets referring to shares purchased in other companies intended for income generation or capital gains.