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Assume two perfectly negatively correlated securities X & Y. X has an expected return = 12% and a risk = 20%. Y has an expected

  1. Assume two perfectly negatively correlated securities X & Y. X has an expected return = 12% and a risk = 20%. Y has an expected return = 9% and a risk = 18%. Based on this information, what is the risk free rate? Hint: you need to find the minimum variance portfolio of X & Y. Since correl = -1, you know that the minimum variance portfolio has risk = 0.

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