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Could someone please provide a more detailed explanation of why the risk free rate is 5% so i can better understand? Very simple question) Suppose

Could someone please provide a more detailed explanation of why the risk free rate is 5% so i can better understand?
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Very simple question) Suppose there are two types of stocks: type S and type I. - Type S stocks: 50 -50 chance for going up and down. 40%,25%. All type 5 stocks move together. - Type I stocks: 5050 chance for going up and down. 20%,10%. All type I stocks are independent. There are only two types of (many) stocks in this economy. a. Can you determine risk free rate in this economy? Solution) yes b. If so, what is it? Solution) 5%, why

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