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Well, I am asking this, because I am kinda confused. Here, there seems to be an error. Because they say the risk free asset and they're probably referring to WIG and it should be 0.12 and not 0.08. So, in case I am wrong, how do you determine the risk free rate of an asset?


The risk-free rate is the rate you would get by investing in a riskless asset such as cash (via bank interest) or a bond. The asset here is the cash or the bond.

If the question doesn't tell you what the risk-free rate is you could answer with a formula and an example, which would be safer than using the wrong thing :-

Let risk-free rate = r, e.g. 0.08 or 8%

wi = (r - 0.22)/(r - 0.2) = 1.16667

For real-world purposes, 4 week T-bills can be used as a proxy for the risk-free rate.

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