Suppose that numerous stocks space traded in the market and also that the ispossible to borrow in ~ the risk-free rate, .The characteristics of 2 of the stocks space as follows:

Stock

Expected Return

Standard Deviation

A

11

%

35

%

B

20

%

65

%

Correlation = –1

a. calculation the expected rate of return top top thisrisk-free portfolio? (Hint: have the right to a details stockportfolio it is in substituted because that the risk-free asset?) (Roundyour answer come 2 decimal places.)

b. can the equilibrium begreater 보다 14.15%?

*

Yes

*

No




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(2) because that Risk free footfolio WA = 6B SA+GB ns LOA = 65 A 65+35 & <65 = 10A OB = 1.65 op - 35 - ER) = -65 (+ .3g(20) TER) = 14.15) (6) 14.15 ER) – 14.15 Rf must also be united state 14.151.
Add prize to:Suppose that many stocks are traded in the market and also that that is possible to borrow at the risk-free rate, rƒ. The chara...Your Answer:


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