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2. Suppose that the index model for stocks A and B is estimated with the following results: RA=0.04+0.80RM+eARB=0.03+1.2RM+eBM=0.30;RA-square=0.20;RB-square=0.16 a) What is the standard deviation of
2. Suppose that the index model for stocks A and B is estimated with the following results: RA=0.04+0.80RM+eARB=0.03+1.2RM+eBM=0.30;RA-square=0.20;RB-square=0.16 a) What is the standard deviation of each stock? b) Break down the variance of each stock to the systematic and firm-specific components. c) Suppose a portfolio P invests in A and B, and the weights of A and B are 60 and 40 percent respectively. Find the beta for the portfolio Step by Step Solution
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Financial Markets And Institutions
Authors: Anthony Saunders, Marcia Cornett
4th Edition
0077262379, 978-0077262372
