free rate of $7\%$ and use it to compute the Sharpe ratio of stocks $L,M$ and the portfolio. Finally, compute the correlation between stocks $L$ and $M$ using equation $7\mathrm{.}11$ in your text, or the excel function $=$correl$().$

Standard Deviation

Sharpe Ratio

Correlation between $L$ and $M$ returns

If correlation between Land M were higher, what would be the likely impact on the portfolio

Sharpe ratio? $($increase$/$decrease$)$

Compute the required rate of return on a stock with beta $=1\mathrm{.}5$ if the market risk premium is $7\%$ and the risk$-$free rate is $2\%.$ Use equation $7\mathrm{.}12$ in your text.

Beta

Market Risk Premium

Risk$-$free rate

Requied Rate of Return