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		8	%		40	%
B		13	%		60	%
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?)

Rate of return %

b. Could the equilibrium r be greater than 10%?

	Yes
	No