Based on a two-factor model, consider two securities with the following characteristics: The standard deviations of factors

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Based on a two-factor model, consider two securities with the following characteristics:

The standard deviations of factors 1 and 2 are 20% and 15%, respectively, and the factors have a covariance of 225. What are the standard deviations of securities A and B? What is their covariance?

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Fundamentals of Investments

ISBN: 978-0132926171

3rd edition

Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey

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Question Posted: Mar 16, 2016 02:52 AM

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Based on a two-factor model, consider two securities with the following characteristics: The standard deviations of factors

Question:

Characteristic Factor 1 sensitivity Factor 2 sensitivity Nonfactor risk( Security A 1.5 2.6 25.0 Security B .7 1.2 16.0

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Based on a twofactor model the variance of a security is Therefore for the t...View the full answer

Fundamentals of Investments

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