Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you compute the expected returns and volatilities

You compute the expected returns and volatilities of stocks A and B as E(RA)=3.2%, E(RB)=9.3%,...

80.2K

Verified Solution

Question

Finance

You compute the expected returns and volatilities of stocks A and B as

E(RA)=3.2%, E(RB)=9.3%, (RA)=12.4%, and (RB)=5.5%.

The correlation between RA and RB is negative and equal to 1. Combine the two assets, A and B, to get a risk-free portfolio. What must be the value of the risk-free borrowing and lending rate? Report your answer in decimal form and round to 4 decimal places.

image

You compute the expected returns and volatilities of stocks A and B as E(RA)=3.2%, E(RB)=9.3%, o(RA)=12.4%, and o(RB)=5.5%. The correlation between RA and RB is negative and equal to -1. Combine the two assets, A and B, to get a risk-free portfolio. What must be the value of the risk-free borrowing and lending rate? Report your answer in decimal form and round to 4 decimal places

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

Finance
1.2K views

Suppose Disney issued a convertible (non-callable) bond with an annual coupon of 10% that matures in...

Accounting
1.2K views

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...

Physics
1.2K views

6 moles get dissociated supplied is 1 250R 3 750R 1000R A vessel contains diatomic...

Calculus
1.2K views

1 QuchuIOITO VI m 2 The slope of a line is given 5 11 To...

Calculus
1.2K views

4 Find the limit 3 o A B 8 14 4 1 2 lim 0...

Algebra
1.2K views

2 3 4 5 6 7 8 9 10 12 8x 1 x 2 3...

Accounting
1.2K views

Beverly and Ken Hair have been married for 3 years. Beverly works as an accountant...

Accounting
1.2K views

Pian, Inc. owns 80% of Sior, Inc. During the year just ended, Pian sold goods...

Accounting
1.2K views

Which of the following is not considered a limitation of internal control A) Not having...

Accounting
1.2K views

Susan takes the exam. There are three multiple-choice questions she doesn't know which answer is...

Finance
1.2K views

Question 4 What is the dollar-weighted return over the entire time period? (Assume no dividends)...

Accounting
1.2K views

On October 31st, your company, CatzCo., loaned $34,000 in cash to another company, DogzC C0.....