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% | 4% |
| B | 19% | 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.) (Do not round intermediate calculations. Round your answer to 3 decimal places.)
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Mergers Acquisition And Other Restructuring Activities
Authors: Donald M. Depamphilis
6th Edition
123854857, 978-0123854858
