Question: Show all work please. 2 value: 10.00 points Suppose that many stocks are traded in the market and that it is possible to borrow at

Show all work please.

Show all work please. 2 value: 10.00 points Suppose that many stocks

2 value: 10.00 points Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation 25 % 75 % 10% Correlation =-1 a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be substituted for the risk- free asset?) (Round your answer to 2 decimal places) Rate of return b. Could the equilibrium rf be greater than 700%? O Yes Nes

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