Suppose that there are many stocks in the security market and that the characteristics of stocks...

Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows:

Stock		Expected Return			Standard Deviation
A			11	%		4	%
B			21			10
	Correlation = –1

Suppose that it is possible to borrow at the risk-free rate, r_f. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from stocks A and B.) (Do not round intermediate calculations. Round your answer to 3 decimal places.)

Risk-free rate

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jeff jeffy answered 1 month ago

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