Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows:
Stock Expected Return Standard Deviation
A 14% 5%
B 15% 13%
Correlation = –1
(a) Suppose that it is possible to borrow at the risk-free rate, rf. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from stocks A and B.)

Stormie zanzibar owns a bakery in the fictitious country of olombia. each month the government’s market ministry mails her a large list of the regulated price of goods which include products like bread, muffins and flat bread. the list also dictates the types of goods she can sell at the bakery and what she is to charge. because of the regulations placed on these goods, stormie has increased her production of sweets, pies, cakes, croissants and buns and decreased her supply of breads, muffins and flat bread. she has taken these steps because the sweet goods’ prices are not government controlled. stormie zanzibar lives under what type of economy?