Helen's portfolio consists solely of an investment in Tombland stock. Tombland has an expected return of 15% 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 Helen wants to maintain the current expected return on his portfolio, then the minimum volatility that Helen could achieve by investing in the market portfolio and risk-free investment is closest to: 24.75% 27.5% 12.5% 15%
Helen's portfolio consists solely of an investment in Tombland stock. Tombland has an expected return of 15% 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 Helen wants to maintain the current expected return on his portfolio, then the minimum volatility that Helen could achieve by investing in the market portfolio and risk-free investment is closest to: 24.75% 27.5% 12.5% 15%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Helen's portfolio consists solely of an investment in Tombland stock. Tombland has an expected return of 15% 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 Helen wants to maintain the current expected return on his portfolio, then the minimum volatility that Helen could achieve by investing in the market portfolio and risk-free investment is closest to:
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24.75% |
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27.5% |
||
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12.5% |
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15% |
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