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1. Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows: Stock
1. Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows: Stock A Expected Return=10% Standard Deviatio=8% Stock B Expected Return=15% Standard Deviatio=10% Correlation=-1 Suppose that it is possible to borrow at the risk-free rate, rf. What must be the value of the risk-free rate? (Hint : Think about constructing a risk- free portfolio from stocks A and B.)
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