Problem $8\mathrm{.}13($CAPM$,$ Portfolio Risk, and Return$)$

Problem Walk$-$Through

$0$ and $1.)$

$\backslash$table$[[$Stock$,$Expected Return,Standard Deviation,Beta$],[$A$,7\mathrm{.}65\%,14\%,0\mathrm{.}7],[$B$,9\mathrm{.}45,14,1\mathrm{.}1],[$C$,12\mathrm{.}15,14,1\mathrm{.}7]]$

Fund $P$ has one$-$third of its funds invested in each of the three stocks. The risk$-$free rate is $4\mathrm{.}5\%,$ 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 one decimal place.

$\%$

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$.$ What would you expect the standard deviation of Fund $P$ to be$?$

I. Less than $14\%$

II$.$ Greater than $14\%$

III. Equal to $14\%$

$-$Select$-$