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:

Sociological Research

The scientific process of investigating social phenomena, patterns, and behaviors through various methods and approaches.

Deductive Reasoning

The process of creating a specific research question about a focused point, based on a more general or universal principle.

Inductive Reasoning

The process of arriving at general conclusions from specific observations.

Controlled Experiment

A scientific test in which only one variable is changed at a time to isolate and measure its effect accurately.