Consider two perfectly negatively correlated risky securities A and B A has an expected rate of return of 12% and a standard deviation of 17%. B has an expected rate of return of 9% and a standard deviation of 14%.
The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.
A) 9.5%
B) 10.4%
C) 10.9%
D) 9.9%

Question

Quizplus · Accepted Answer

E(RP) = 0.45(12%) + 0.55(9%) = 10.35%.

Consider Two Perfectly Negatively Correlated Risky Securities a and B