2. The expected return, risk, and weight for each stock in a portfolio are given below, so is the expected return and the standard deviation for the market. Moreover, the correlations for each stock to the market and to each other are also given below as well Expected Standard Beta return Deviation ETA) 34 90 BA 2.20 Era) 10 35 0.90 Erc) 5 16 Bc 0.54 % OB 00 % % Market Information Investment Weight A B Correlation Coefficient PAC 20 30 50 Res 0.30 0.91 -0.10 RM MRP 4 18 14 Calculate expected return of the portfolio which composes of all three stocks. Calculate standard deviation of the portfolio which composes of all three stocks. Wo 22 Wo Wo = 2W WOO A BABAB 2WWp66 2W W BC BC BC Std Dev of Portfolio From the risk-free rate given, what is the required rate of return for each stock? From the required rate of return for each stock that you just calculated, compare with expected retum given in the table, which stock is undervalued overvalued? Calculate required rate of return of the portfolio which composes of all three stocks. Hint: first, you must identify beta of the portfolio If the investor's risk aversion increases and the market risk premium (MRP) increases by 2%, what is the new required rate of return of the portfolio