Consider the following information for Stocks A, B, and C. The returns on the three stocks, while positively correlated, are not perfectly correlated. The risk-free rate is 4.00%. Stock Expected Return Standard Deviation Beta A 7.60% 15% 1.2 B 9.40% 15% 1.8 C 11.20% 15% 2.4 Let r, be the expected return of stock i, rxr represent the risk-free rate, b represent the Beta of a stock, and r represent the market return. Using SML equation, you can solve for the market risk premium which, in this case, equals approximately Consider Fund P, which has one third of its funds invested in each of stock A, B, and C. The beta for Fund P is approximately You have the market risk premium, the beta for Fund P, and the risk-free rate. aturn is equal to the expected rate of return for each stock