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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, rs. The characteristics of two
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rs. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 7% 45% B 10% 55% Correlation = -1 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 decimal number rounded to 4 decimal places.)
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