For portfolio P with investment proportions of .60 in A and .40 in B, rework Problems 9,

Question:

For portfolio P with investment proportions of .60 in A and .40 in B, rework Problems 9, 10, and 12.

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

RA = 3% 1 .7RM + eA

RB = 22% 1 1.2RM + eB

σM = 20%; R-squareA 5 .20; R-squareB = .12

Stocks
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