There are two risky assets; their volatilities are 15% (Asset 1) and 25% (Asset 2). Their return correlation is -1. The expected return on Asset 1 is 4%. The risk-free rate of the economy is (generously) 5.5%. Assuming arbitrage opportunities do not exist, what is the expected return on Asset 2?

Answer rating: 100% (QA)

The expected return on Asset 2 can be calculated using the Capital Asset Pricing Mo... View the full answer