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Your investment portfolio consists of $10,000 invested in only one stock-Microsoft. Suppose the risk-free rate is 5%, Microsoft stock has an expected return of 11
Your investment portfolio consists of $10,000 invested in only one stock-Microsoft. Suppose the risk-free rate is 5%, Microsoft stock has an expected return of 11 and a volatility of 37% and the market portfolio has an expected return of 9% arh a volatility of 19%. Under the CAPM assumptions, a. What alternative investment has the lowest possible volatility while having the same expected return as Microsoft? What is the volatility of this investment? b. What investment has the highest possible expected return while having the same volatility as Microsoft? What is the expected return of this investment? Hint: Make sure to round all intermediate calculations to at least five decimal places. a. What alternative investment has the lowest possible volatility while having the same expected return as Microsoft? To create an alternative investment that has the lowest possible volatility while having the same expected return as Microsoft, we the forming Sell: Borrow: Buy: Buy
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