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5. Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 3.6% +
5. Suppose that the index model for stocks A and B is estimated from excess returns with the following results: |
RA = 3.6% + 1.2RM + eA | |
RB = 1.6% + 1.5RM + eB | |
M = 16%; R-squareA = 0.25; R-squareB = 0.15 |
Break down the variance of each stock to the systematic and firm-specific components. (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.) |
Risk for A | Risk for B | |
Systematic | _____________?? | _______________?? |
Firm-specific | _____________?? | _______________?? |
Answers only please. Fill in the blanks only. Thank you.
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