Consider the following information for Stocks X, Y, and Z. The returns on the three stocks are positively correlated, but they are not perfectly correlated. Fund Q has one-third of its fund invested in each of the three stocks. The risk-free rate is 5% and the market is in equilibrium. (That is, required returns equal expected returns.)

Stock X / Expected return 9.00% / Standard Deviation 15% / Beta 0.7

Stock Y / Expected return 10.50% / Standard Deviation 15% / Beta 1.1

Stock Z / Expected return 12.50% / Standard Deviation 15% / Beta 1.7

What is the market risk premium?

What is the required return of Fund Q ?