1) The following are estimates for two stocks. Stock A B Expected Return 13% Beta 0.8 1.2 Firm-Specific Standard Deviation 30% 40 18 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%, Risk Free Bond: 25%. Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio. 1) The following are estimates for two stocks. Stock A B Expected Return 13% Beta 0.8 1.2 Firm-Specific Standard Deviation 30% 40 18 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%, Risk Free Bond: 25%. Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio