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: Stock A: Expected return = 4% and standard deviation = 12.50% Stock B: Expected return = 6% and standard deviation = 14.50% If correlation between stock A and stock B is -1 (perfectly negatively correlated), then which of the following represents a value closest to equilibrium risk-free rate?

4.51%

4.74%

4.93%

4.23%

3.93%

None of the above