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  3. 4. consider the following information for stocks a

4. Consider the following information for Stocks A, B, and C. The retums on the...

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4. Consider the following information for 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). Stock Expected Retum 9.55% 10.45% 12.70% Standard Deviation 15.00% 15.00% 15.00% 0.9 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, the required returns equal expected returns.) a) What is the market risk premium? b) What is the beta of Fund P? c) What is the required return of Fund P? d) Would you expect the standard deviation of the Fund P to be less than 1%, equal to 15%, or greater than 15%? Explain

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