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0.8 18 40 The following are estimates for two stocks: Stock Expected Return Beta Firm-Specific Standard Deviation TM 13% 30 % BMW 1.2 The market

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

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