The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 13% 0.8
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The following are estimates for two stocks.
Stock Expected Return Beta Firm-Specific Standard Deviation A 13% 0.8 30%
B 18 1.2 40 The market index has a standard deviation of 22% and the risk-free rate is 8%.
a. What are the standard deviations of stocks A and B?
b. Suppose that we were to construct a portfolio with proportions:
Stock A: .30 Stock B: .45 T-bills: .25 Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio.
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