Question
You compute the expected returns and volatilities of stocks A and B as E(RA)=9%, E(RB)=6%, (RA)=16%, and (RB)=8%. The correlation between RA and RB is
You compute the expected returns and volatilities of stocks A and B as E(RA)=9%, E(RB)=6%, (RA)=16%, and (RB)=8%. The correlation between RA and RB is negative and equal to 1. Combine the two assets, A and B, to get a risk-free portfolio. What must be the value of the risk-free borrowing and lending rate?
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Introductory Econometrics For Finance
Authors: Chris Brooks
4th Edition
110843682X, 9781108436823
