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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 f . The characteristics
| 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 | Expected Return | Standard Deviation | ||||||
| A | 9 | % | 40 | % | ||||
| B | 15 | 60 | ||||||
| | ||||||||
| Correlation = |
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