You own Amazon stock. Suppose that Amazon has an expected return of 52% and a volatility of 19%. The market portfolio has an expected return of 30% and a volatility of 10%. The risk-free rate is3%.Assuming the CAPM assumptions hold, you want to find an alternative portfolio with the same expected return and the lowest possible volatility (standard deviation) as Amazon. The volatility of thisportfolio is closest to:O A. 29.3%.O B. 18.1%.OC. 32.8%.O D. 19.5%.

SD(RxCML) = xSD(RMkt).23 = x(.16) → x = .23/.16 = 1.4375, so long 144% market and short 44%…

Answered: You own Amazon stock. Suppose that…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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