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(Solved): Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-fr ...



Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, \( r_{f} \). The c

Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, . The characteristics of two of the stocks are as follows: 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 be greater than ? Yes No


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Given,Risk free portfolio has Zero standard deviationLet wA be the weight of stock A and wB be the weight of stock BCorrela
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