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Tom's portfolio consists solely of an investment in Merck stock. Merck has an expected return of 13% and a volatility of 25%. The market portfolio

Tom's portfolio consists solely of an investment in Merck stock. Merck has an expected return of 13% and a volatility of 25%. The market portfolio has an expected return of 12% and a volatility of 18%. The risk free rate of 4%. Assume that the CAPM assumption holds in the market. Assuming Tom wants to maintain the current volatility in his portfolio then calculate  the amount that Tom should invest in the market portfolio to maximize his expected return.

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1 Use the CAPM formula to find the required return for a portfolio with 25 volatility Required Retur... blur-text-image

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