What is the risk-free rate of interest in this economy

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Reference no: EM131882229

Suppose Intel’s stock has an expected return of 20% and a volatility of 25%, while Coca-Cola’s has an expected return of 10% and volatility (i.e. standard de-viation) of 10%. If these two stocks were perfectly negatively correlated (i.e. their correlation coefficient is -1),

i. Calculate the portfolio weights that remove all risk.

ii. If there are no arbitrage opportunities, what is the risk-free rate of interest in this economy?

Reference no: EM131882229

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