Consider two perfectly negatively correlated risky securities A and B A has an expected rate of return of 10% and a standard deviation of 16%. B has an expected rate of return of 8% and a standard deviation of 12%.
The risk-free portfolio that can be formed with the two securities will earn a(n) _____ rate of return.

Question

Quizplus · Accepted Answer

E(RP) = 0.43(10%) + 0.57(8%) = 8.86%.

Consider Two Perfectly Negatively Correlated Risky Securities a and B