You currently hold a $50,000 investment in Telus stock. It has 9% expected return and 18%...

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You currently hold a $50,000 investment in Telus stock. It has 9% expected return and 18% volatility. A market index fund is available with 15% expected return and 10% volatility. The risk-free rate is 5%. Required Based on the CAPM, how would you switch from your Telus stock investment: a) To a portfolio with the lowest possible volatility while having the same expected return as the Telus stock? b) To a portfolio with the highest possible expected return while having the volatility as the Telus stock? c) To a portfolio with both a higher expected return and a lower volatility? d) Referring to your answer to Part (a) above, what will be the lowest possible volatility of the portfolio you will switch to? e) Referring to your answer to Part (b) above, what will be the debt-equity ratio of the portfolio you will switch to? You currently hold a $50,000 investment in Telus stock. It has 9% expected return and 18% volatility. A market index fund is available with 15% expected return and 10% volatility. The risk-free rate is 5%. Required Based on the CAPM, how would you switch from your Telus stock investment: a) To a portfolio with the lowest possible volatility while having the same expected return as the Telus stock? b) To a portfolio with the highest possible expected return while having the volatility as the Telus stock? c) To a portfolio with both a higher expected return and a lower volatility? d) Referring to your answer to Part (a) above, what will be the lowest possible volatility of the portfolio you will switch to? e) Referring to your answer to Part (b) above, what will be the debt-equity ratio of the portfolio you will switch to?

Answer rating: 100% (QA)

To answer the questions based on the Capital Asset Pricing Model CAPM we need to calculate the required variables using the given information Given data Telus Stock Expected Return Telus 9 Volatility ... View the full answer