Suppose stock a has an expected return of 26 and a, Ask an Expert

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Suppose stock A has an expected return of 26% and a volatility of 50% while stock B has an expected return of 6% and volatility of 25%. These two stocks were perfectly negatively correlated (i.e., their correlation is -1)

a) How to mix these two assets to create a portfolio with zero standard deviation?

b) if there are no arbitrage opportunities, what is the risk-free rate of interest in this economy?

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Financial Management, Finance

Category:- Financial Management
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