Question
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 2.00% + 0.40
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA= 2.00% + 0.40RM+eA
RB= -1.80% + 0.90RM+eB
M= 15%;R-squareA= 0.30;R-squareB= 0.22
Assume you create portfolioPwith investment proportions of 0.70 inAand 0.30 inB.
a.What is the standard deviation of the portfolio?(Do not round your intermediate calculations.Round your answer to 2 decimal places.)
b.What is the beta of your portfolio?(Do not round your intermediate calculations.Round your answer to 2 decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
5th edition
1111527369, 978-1111527365
