Problem 7-12 Suppose that there are many stocks In the security market and that the characteristics of stocks A and B are glven as follows: Еxpected Standard Stock Return Deviation A 10 19 11 Correlation Suppose that It is possible to borrow at the risk-free rate, r. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfollo from stocks A and B.) (Do not round Intermedlate calculatlons. Round your answer to 3 decimal places.) Risk-free rate %

Problem 7-12 Suppose that there are many stocks In the security market and that the characteristics of stocks A and B are glven as follows: Еxpected Standard Stock Return Deviation A 10 19 11 Correlation Suppose that It is possible to borrow at the risk-free rate, r. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfollo from stocks A and B.) (Do not round Intermedlate calculatlons. Round your answer to 3 decimal places.) Risk-free rate %

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 14MC

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Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows: Stock Expected Return Standard Deviation A 12 % 4 % B 19 12 Correlation = –1 Suppose that it is possible to borrow at the risk-free rate, rf. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from stocks A and B.)