It is possible to borrow at the risk free rate. What is the expected return? The hint is can a particular stock be formed to make a synthetic risk free asset. I am totally lost on this one because the expected return formula does not involve standard deviation.   Expected Return Standard Deviation Correlation Stock J 8% 55% -1% Stock P 5% 45%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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It is possible to borrow at the risk free rate. What is the expected return? The hint is can a particular stock be formed to make a synthetic risk free asset. I am totally lost on this one because the expected return formula does not involve standard deviation.

  Expected Return Standard Deviation Correlation
Stock J 8% 55% -1%
Stock P 5% 45%  

 

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