Suppose that there are many stocks in the security market and that the characteristics of stocks$$A$$and$$B$$are given as follows:

$$

StockExpected Return$$Standard DeviationA$9\%3\%$B$2013$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$.)$

What is the investment proportion in your fund that is appropriate for your client?