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

Stock A Expected Return-6%

Standard Deviation- 25%

Stock BExpected Return-12%Standard Deviation- 75%

Correlation = -1

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%