Consider Two Perfectly Negatively Correlated Risky Securities, K and L

question 53

Multiple Choice

Consider two perfectly negatively correlated risky securities, K and L. K has an expected rate of return of 12% and a standard deviation of 17%. L has an expected rate of return of 9% and a standard deviation of 11%. The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.

• A) 9.5%
• B) 10.18%
• C) 10.9%
• D) 9.9%
• E) None of the options are correct.