Question
CORPORATE FINANCE RELATE QUERY Given the following: You currently own $100,000 worth of Wal-Mart stock. Suppose that Wal-Mart has an expected return of 14% and
CORPORATE FINANCE RELATE QUERY
Given the following: 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 highest possible expected return while having the same volatility as Wal-Mart? What is the expected return of this portfolio?
I know to use the formula for the expected return is E[RxCML] = rf+ x(E[RMkt] - rf), I just cannot figure out how to calculate the beta? which is "x" in this formula with the information above.
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