onsider the following information for 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 8.74% 16% 0.9 B 9.98 16 1.2 C 12.06 16 1.7 Fund P
has one-third of its funds invested in each of the three stocks.
The risk-free rate is 5%, and the market is in equilibrium. (That
is, required returns equal expected returns.) What is the market
risk premium (rM - rRF)? Round your answer to two decimal places.
%
What is the beta of Fund P? Do not round intermediate calculations.
Round your answer to two decimal places. What is the required
return of Fund P? Do not round intermediate calculations. Round
your answer to two decimal places. %
Would you expect the standard deviation of Fund P to be less than
16%, equal to 16%, or greater than 16%? Less than 16% Greater than
16% Equal to 16%
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