Question
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
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 Expected Return Standard Deviation
A 7% 30%
B 10% 70%
Correlation = -1
a.Calculate the expected rate of return on this risk-free portfolio? (Hint:Can a particular stock portfolio be substituted for the risk-free asset?)(Round your answer to 2 decimal places.)
Rate of Return =
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
