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What is the annual risk-free rate

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Reference no: EM133046820

Problem - In this problem there are only two risky stocks, A and B, whose details are listed the table below.

DETAILS OF STOCKS A AND B

 

Number of shares outstanding

Price per share

Expected rate of return

Standard deviation of return

Stock A

100

$1.50

15%

15%

Stock B

150

$2.00

12%

9%

Furthermore, the correlation coefficient between the returns of stocks A and B is ρAB = 1/3. There is also a risk-free asset, and the market follows the CAPM exactly. What is the annual risk-free rate?

Reference no: EM133046820

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