Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. the characteristics of two of the stocks are as follows: stock expected return standard deviation a 8 % 55 % b 4 % 45 % correlation = –1 a. calculate the expected rate of return on this risk-free portfolio?

kjnsk nidn t

dfj dt

step-by-step explanation:

vjnijernv

3

step-by-step explanation:

3

let

step

find the slope of the line ab

we know that

the formula to calculate the slope between two points is equal to

substitute the values

step

find the equation of the line ab with the slope m and point a

we know that

the equation of the line in the slope-point form is equal to

substitute the values

convert to function form

let

therefore

the answer is the option

see the attached figure to better understand the problem