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I have an assignment and I have to calculate the risk-free rate with the following data:

Stock A: E(R) = 10% ; Standard Deviation = 5%.

Stock B: E(R) = 20% ; Standard Deviation = 10%.

I also know that the correlation coefficient of the two assets is -1.

I have tried to use the Sharpe Ratio or the CAPM formula for risk-free rate, but without any success.

Thanks for the help!

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closed as off-topic by LocalVolatility, Helin, chollida, Bob Jansen Jan 29 '18 at 9:00

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "Basic financial questions are off-topic as they are assumed to be common knowledge for those studying or working in the field of quantitative finance." – LocalVolatility, Helin, chollida, Bob Jansen
If this question can be reworded to fit the rules in the help center, please edit the question.

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Hint: If these 2 stocks have perfect negative correlation (correlation: -1), then you can construct a risk free portfolio. What would the return on that risk free portfolio be?

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