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 $1.)$

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 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.

Open spreadsheet

a$.$ What is the market risk premium $(\{$:$r_M-r_{RF})?$ Round your answer to two decimal places.

$\%$

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.

$\%$

d$.$ Would you expect the standard deviation of Fund $P$ to be less than $15\%,$ equal to $15\%,$ or greater than $15\%?$

I. less than $15\%$

II$.$ greater than $15\%$

III. equal to $15\%$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 $9\mathrm{.}34\%15\%0\mathrm{.}8$

B $11\mathrm{.}26151\mathrm{.}2$

C $13\mathrm{.}18151\mathrm{.}6$

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 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.