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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, r. The characteristics of two

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 9% 30% B 16% 70% Correlation = 1 Required: a. Calculate the expected rate of return on this risk-free portfolio. (Hint: Can a particular stock portfolio be formed to create a synthetic risk-free asset?) (Round your answer to 2 decimal places.)

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