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You currently own $20,000 worth of IBM's stock. Suppose that IBM has an expected return of 15% and a volatility of 23%. The market portfolio
You currently own $20,000 worth of IBM's stock. Suppose that IBM has an expected return of 15% and a volatility of 23%. The market portfolio has an expected return of 11% 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 IBM? What is the expected return of this portfolio?
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