Your investment portfolio consists of $18,000 invested in only one stock—Microsoft. Suppose the riskfree rate is...

Your investment portfolio consists of $18,000 invested in only one stock—Microsoft. Suppose the riskfree rate is 6%, Microsoft stock has an expected return of 13% and a volatility of 44%, and the
market portfolio has an expected return of 12% and 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?

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