Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. suppose that many stocks are traded in the market

Suppose that many stocks are traded in the market and that it is possible to...

80.2K

Verified Solution

Question

Finance

image

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 9% 13% Standard Deviation 45% 55% A Correlation = -1 Required: a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be formed to create a "synthetic" risk-free asset?) (Round your answer to 2 decimal places.) Rate of return % b. Could the equilibrium rf be greater than rate of return? Yes O No

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students