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:

a$.$ Calculate the expected rate of return on the risk$-$free portfolio? $($Hint: Try to construct a

risk$-$free portfolio using stocks A and B$.)($Enter your answer as a percentage

rounded to $2$ decimal places.$)$

Expected rate of

return

b$.$ Could the equilibrium $rf$ be greater than, equal to$,$ or less than your answer in #a$?$

greater than

equal to

less than