Question
Excel Online Structured Activity: CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the
Excel Online Structured Activity: CAPM, portfolio risk, and return
Consider the following information for three stocks, Stocks 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.)
Stock | Expected Return | Standard Deviation | Beta | ||
A | 8.58 | % | 14 | % | 0.7 |
B | 10.34 | 14 | 1.1 | ||
C | 12.10 | 14 | 1.5 |
Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (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 questions below.
File Home Insert Formulas Data Review View Help Tell me what you want to do Comments B Arial 10 AP Q1 ITX SL AutoSum 2 o X Cut [G Copy Format Painter Paste BI U Dab A Av $ % 2.8 Insert Delete Format Clear Conditional Format Cell Formatting vas Table Styles Tables Sort & Find & Filter Select Undo Clipboard Font Alignment Number Cells Editing B D E F G H I ] L M N o Q R 5.50% HNMON Stock A Formula Formula Formula 8.58% 14.00% 0.70 Stock B 10.34% 14.00% 1.10 Stock C 12.10% 14.00% 1.50 Beta B10 fx A CAPM, portfolio risk, and 1 return 2 3 Risk-Free Rate, rRF 4 5 6 Expected Return 7 Standard Deviation 8 9 10 Market Risk Premium, RPM 11 12 % Stock in Fund P 13 14 Beta of Fund P 15 16 Required Return of Fund P 17 18 Expected Return of Fund P 19 20 21 22 #N/A #N/A #N/A 0.333333 0.333333 0.333333 #N/A #N/A #N/A 23 Sheet1 + Calculation Mode: Automatic Workbook Statistics Help Improve Office 100% +Step by Step Solution
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