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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, r f . The characteristics of two of the stocks are as follows:
|
Stock |
Expected Return |
Standard Deviation |
|
A |
8% |
40% |
|
B |
13 |
60 |
|
Correlation 5 21 |
 |  |

Could the equilibrium r f be greater than 10%? ( Hint: Can a particular stock portfolio be substituted for the risk-free asset?) (LO 6-3)
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