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6.3. Consider the following two-factor model for the returns of three stocks. Assume that the factors and epsilons have means of zero. Also, assume
6.3. Consider the following two-factor model for the returns of three stocks. Assume that the factors and epsilons have means of zero. Also, assume the factors have variances of .01 and are uncorrelated with each other. EA TA = .13 + 6F + 4 + A TB = .15 + 2F + 2F + B rc = .07 + 5F - 1F + Ec If var(A) = .01 var(EB) = 0.4 var(ec) = .02, what are the variances of the returns of the three
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Introduction to Probability
Authors: Mark Daniel Ward, Ellen Gundlach
1st edition
716771098, 978-1319060893, 1319060897, 978-0716771098
