Consider Two Perfectly Negatively Correlated Risky Securities a and B

Multiple Choice

Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 10% and a standard deviation of 16%. B has an expected rate of return of 8% and a standard deviation of 12%. The risk-free portfolio that can be formed with the two securities will earn a(n) _____ rate of return.

A) 8.5%
B) 9.0%
C) 8.9%
D) 9.9%