Problem 4: Suppose that there are many stocks in the security market and that the characteristics of Stocks A and B are given as follows (a) Expected Return toc TO% Suppose that it is possible to borrow at the risk-free rate, rt. What must be the value of the risk-free rate? Explain. HINT!!! The stocks are perfectly negatively correlated. (b) Calculate the expected return and standard deviation of an equally weighted portfolio of Stock A, Stock B and the risk-free asset. What is the optimal portfolio? Assume the investors risk aversion coefficient is given by A-4. Provide all the relevant portfolio weights for all three assets. The utility function is given below. HINT: The formula sheet contains a formula for the optimal risky portfolio (c) the special case of two risky assets. Problem 4: Suppose that there are many stocks in the security market and that the characteristics of Stocks A and B are given as follows (a) Expected Return toc TO% Suppose that it is possible to borrow at the risk-free rate, rt. What must be the value of the risk-free rate? Explain. HINT!!! The stocks are perfectly negatively correlated. (b) Calculate the expected return and standard deviation of an equally weighted portfolio of Stock A, Stock B and the risk-free asset. What is the optimal portfolio? Assume the investors risk aversion coefficient is given by A-4. Provide all the relevant portfolio weights for all three assets. The utility function is given below. HINT: The formula sheet contains a formula for the optimal risky portfolio (c) the special case of two risky assets