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Consider the following information for three stocks, 5 tocks A,B, and C. The returns on the three stocks are positively correlated, but they are not
Consider the following information for three stocks, 5 tocks A,B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Fund P has one-third of its funds ievested in esch of the three stocks. The risk-free nate is 5%, and the market is in equilibriam. (That is, required returns equal expected returns.) The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the cuestions below. Open spreedsheet a. What is the market nisk premium (f4r12))7 Round your answer to two decimal places: 4. What is the beta of Fund p ? Do not round internediate cakculatisns. Hound your ansner to two decimal places. c. What is the required retum of Fund p? Do not round intermediate calculationt, Pound your answer to two decimal places. d. Would you expect the standard devution of Fund P to be less than 16%, equal to 16%, or grwater than 16% ? 1. Wes than 16% II. greater than 16% 111. eesui to 16%
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