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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, 17. 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, 17. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation 404 Correlation = -1 A 12 214 64 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 b. Could the equilibrium ry be greater than 15.60%? Yes No

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