Estimate the beta of the following stocks assuming the standard deviation of the market returns is 7 percent. The expected return, standard deviation are given. The correlation coefficient is between the stock and the market. Use a 3 percent risk free rate and a 7 percent equity/market risk premium.

Stock Expected Return Standard Deviation CorrelationCoefficient

P 12% 10% 0.80

Q 18% 20% 0.60

R 15% 15% 0.40

a. What is the beta for each stock?

b. What is the required return for each stock?

c. Which stocks, if any, would you purchase?