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Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. characteristics of two
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 8% 40% B 13 60 Correlation = -1 The Could the equilibrium rf be greater than 10%? (Hint: Can a particular stock portfolio be substituted for the risk-free asset?)
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Essentials of Investments
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