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 Bare given as follows: |
| Stock | Expected Return | Standard Deviation | ||||||
| A | 14 | % | 6 | % | ||||
| B | 16 | 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. Omit the "%" sign in your response.) |
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Economics And Personal Finance
Authors: Irvin Tucker, Joan Ryan
1st Edition
1133562108, 978-1133562108
