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Question 5 (Risk-free rate 1pt ) Suppose that there are many stocks in the security market and that the characteristics of stocks A and B

Question 5 (Risk-free rate 1pt ) Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows: Suppose that it is possible to borrow at the risk-free rate, rf. What must be the value of the riskfree rate so that there is no arbitrage? (Hint: Think about constructing a risk-free portfolio from stocks A and B.)

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