Question
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
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 | 14 | % | 7 | % | ||||
| B | 18 | 9 | ||||||
| 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.) (Do not round intermediate calculations. Round your answer to 3 decimal places.)
Risk Free Rate? %
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Handbook Of Experimental Finance
Authors: Sascha Füllbrunn, Ernan Haruvy
1st Edition
1800372329, 978-1800372320
