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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:

Micturition

The process of expelling urine from the bladder; also known as urination.

Tubular Secretion

The process by which substances are actively transported out of the blood and into the tubular fluid of the nephrons in the kidneys.

Urine Production

The physiological process by which kidneys filter blood to remove waste products and excess substances, resulting in the formation of urine.

Micturition Reflex

A reflex leading to the urge to urinate, initiated by the stretching of the bladder.