Finance Assignment | Professional Writing
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. The characteristics of two of the stocks are as follows: Stock Expected Return 9% 13% Standard Deviation 45% 55% Correlation = -1 a. Calculate the expected rate of return on this risk-free portfolio?
(Hint: Can a particular stock portfolio be substituted for the risk-free asset?) (Round your answer to 2 decimal places.) Rate of return . % b. Could the equilibrium rf be greater than 10.80%? Yes No
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