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Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. The characteristics of two

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Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. The characteristics of two of the stocks are as follows: Required: a. Calculate the expected rate of return on this risk-free portfollo? (Hint Can a particular stock portfolio be formed to create a "synthetic" risk-free asset?) (Round your answer to 2 decimal places.) b. Could the equilibrium rf be greater than rate of return? Yes No

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