Excel Online Structured Activity: CAPM, portfolio risk, and retum

Consider the following information for three stocks, Stocks A$,$ B$,$ and C$.$ The retums on the three stocks are positively correlated, but they are not perfectly correlated. $($That is$,$ each of the correlation coefficients is between $0$ and $1.)$

$\backslash$table$[[$Stock$,$Expected Return,Standard Deviation,Beta$],[$A$,8\mathrm{.}72\%,16\%,0\mathrm{.}7],[$B$,11\mathrm{.}02,16,1\mathrm{.}2],[$C$,12\mathrm{.}40,16,1\mathrm{.}5]]$

Fund P has one$-$third of its funds invested in each of the three stocks. The risk$-$free rate is $5\mathrm{.}5\%,$ and the market is in equilibrium. $($That is$,$ required returns equal expected retums.$)$ The data has been collected in the Microsot Excel Online flie below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

a$.$ What is the market risk premium $(r_M-{?}^{RE}F)?$ Round your answer to two decimal places.

$3\%$

b$.$ What is the beta of Fund P$?$ Do not round intermediate calculations. Round your answer to two decimal places.

c$.$ What is the required return of Fund P$?$ Do not round intermediate calculations. Round your answer to two decimal places.

$3\%$

d$.$ Would you expect the standard deviation of Fund P to be less than $16\%,$ equal to $16\%,$ or greater than $16\%?$

L$.$ less than $16\%$

II$.$ greater than $16\%$

III. equal to $16\%$

Iv $0$