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Suppose Intel's stock has an expected return of 26% and a volatility of 50%, while Coca-Cola's has an expected return of 6% and volatility of

Suppose Intel's stock has an expected return of 26% and a volatility of 50%, while

Coca-Cola's has an expected return of 6% and volatility of 25%. If these two stocks

were perfectly negatively correlated (i.e., their correlation coefficient is 1),

(a) Calculate the portfolio weights that remove all risk.

(b) If there are no arbitrage opportunities, what is the risk-free rate of interest in

this economy?

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