3. Portfolio Z contains an investment in the market portfolio and a risk

an expected return of 9% and has a standard deviation of 7%. The Co a correlation of 0.42 with the market portfolio and a standard de risk-free yields a return of 5%, and the expected return of the

portfolio and a risk-free asset. It has

1 of 7%. The Coca-Cola stock has d a standard deviation of 20%. The Surn of the market portfolio is 11%.

(a) (points) What is the expected return of Coca-Cola stock.(b) (5 points) If the actual return of Coca-Cola stock is 13%, is the stock expensive or

cheap? What is the stock's alpha?