Stock	Expected Return		Standard Deviation		Beta
A	8.72	%	15	%	0.7
B	11.02		15		1.2
C	12.40		15		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.)

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%

CAPM, portfolio risk, and return Risk-Free Rate, rRF 5.50% Formula Formula Formula Expected Return Standard Deviation Beta Stock A 8.72% 15.00% 0.70 Stock B 11.02% 15.00% 1.20 Stock C 12.40% 15.00% 1.50 Market Risk Premium, RPM #N/A #N/A #N/A % Stock in Fund P 0.333333 0.333333 0.333333 Beta of Fund P #N/A Required Return of Fund P #N/A Expected Return of Fund P #N/A