Question
1. The index model has been estimated for stock A with the following results. What is the standard deviation of stock A's total return? R
1.
The index model has been estimated for stock A with the following results. What is the standard deviation of stock A's total return?
R A = 0.03 + 1.5*R M+e A.
Assume M= 0.20; e A= 0.39.
Round your answer to 4 decimal places.
2.
The following are estimates for a stock A.
Stock | Expected ret. | beta | firm-specific variance, or Var(e) |
A | 0.12 | 1.7 | 0.26 |
The market index has a standard deviation of 0.22, and the risk-free rate if 0.02
What percentage of stock A's total risk is attributable to systematic risk (or market risk)? Here consider variance as the risk measure.
Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
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