Question: Type or paste question here Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate,

Type or paste question here Suppose that many stocks are traded in Type or paste question here

Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, If. The characteristics of two of the stocks are as follows: Stock A B Correlation - - 1 Expected Return 9% 13% Standard Deviation 45% 55% 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 10.80%? Yes

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