Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows: Stock Expected Return Standard Deviation A 11% 5% B 15% 12%

Correlation = 1

Suppose that it is possible to borrow at the risk-free rate, rf. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from stocks A and B.)