50.1K

Verified Solution

Link Copied!

CAPM, portfolle risk, and 1 reture 1. Rink.Firee Rale, rifi 550 \begin{tabular}{r|r} 3tock B & Formula \\ 10.48% \\ 16.00% \\ 1.20 & \\ & = RAUA \\ \hline \end{tabular} stock C Formuls 12.14% 16.00% 1.60 Excel Online Structured Activity: CAPM, portfalio risk, and retum Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively coerelated, but they are not parfectly correlated. (That is, each of the correiation coefficients is between 0 and 1.) Fund P has one-third of its funds invested in esch of the three stocks. The risk-free rate is 5.5%, and the merket is in equabium. (That is, required returns equel expected refurns.) The data has been collected in the Microsoft Excel Oriline file below, Open the spreadsheet and perform the required analysis to answer the questicns below. a. What is the market risk.premium (fMfAP) ? Hound your asswer to two decimal places. b. What is the beta of Fund P? Da fot cound intermedste calculations. Round your answer to two decimal places. c. Whit is the tequied retum of fund p ? Do not round intermedate cakilatens. llound your answer to two decimal gisces. a. What is the market risk premium ( rMrRF) ? 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. %0 d. Would you expect the standard deviation of Fund P to be less than 16%, equal to 16%, or greater than 16% ? 1. less than 16% II. greater than 16% III. equal to 16%

Answer & Explanation Solved by verified expert

See Answer