Stock A has expected return of 15% and standard deviation (s.d.) 20%. Stock B has expected return 20% and s.d. 15%. The two stocks have a correlation coefficient of 0.5.  Protfolio P1       A B Expected Return  15% 20% SD  20% 15% Correlation Coff. 0.5 0.5 Weights  30% 70%   The beta of stock A is 1 and the beta of stock B is 1.5. What is the risk premium on the market portfolio, if the CAPM holds ? Stock D has a beta of 1.2 and expected return 18%. Is this stock overvalued, if the CAPM holds?

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