What is the expected return of this investment

Assignment Help Financial Management

Reference no: EM131936892

Your investment portfolio consists of $15,000 invested in only one stock-Microsoft. Supposethe risk-free rate is 5%, Microsoft stock has an expected return of 12% and a volatility of40%, and the market portfolio has an expected return of 10% and a volatility of 18%. Underthe CAPM assumptions,

a.What alternative investment has the lowest possible volatility while having the sameexpected return as Microsoft? What is the volatility of this investment?

b.What investment has the highest possible expected return while having the samevolatility as Microsoft? What is the expected return of this investment

To create a alternative investment that has the lowest possible volatility while having the same expected return as Microsoft, we us the following strategy:

Sell a)___work of mircosoft

Borrow b) ____at the risk free rate

Buy c) ____worth of the market portfolio

Buy d)____work of the risk free investment

Reference no: EM131936892

Questions Cloud

What expected return can imi provide subject : Investment Management Inc. (IMI) uses the capital market line to make asset allocation recommendations.

Write a java application to create and maintain a phone book : Write a Java application to create and maintain a phone book as shown in Figure 9-53. Display appropriate error messages when any action fails.

Populate an arraylist of character data : Populate an ArrayList of Character data (the wrapper class), with each char in the String represented as a separate Character element in the ArrayList

How can a single sequence variant have different effects : Based on what we know about transcription, RNA processing, and translation, how can a single sequence variant have different effects across the transcript

What is the expected return of this investment : What investment has the highest possible expected return while having the samevolatility as Microsoft? What is the expected return of this investment

Discuss terms-liquidity and maturity risk premiums : Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. If the annual rate of interest on a 2-year Treasury bond.

Protein and amino acid supplements : Identify two roles that proteins play in the body. What are the benefits and risks of taking protein and amino acid supplements?

Write an application to simulate user logon tracking : Write an application to simulate user logon tracking as shown in Figure 9-52. The application should keep a list of users logged on to the system.

Calculate k in the given equation : The only two transactions during the year are a deposit of $15,000 at time 0.25 and a withdrawal of $20,000 at time 0.75. Calculate K.

User Account

All Pages