Question
A security's standard deviation equals 25%, and its random rate of return is summarized as follows: r i = 0 . 04 + 1 .
A security's standard deviation equals 25%, and its random rate of return is summarized as follows:
ri = 0.04 + 1.45 rM +i, iM = 0.521/2;
where M refers to the market portfolio, and iM is the correlation coefficient between security i and the market portfolio. It is assumed that i and rM are uncorrelated.
(Keep 4 decimal places to your answers.)
What is the security's beta ____________
What is the variance of the market portfolio _____________
What are its systematic and diversifiable risks
Systematic Risk: _________ ; Diversifiable Risk: ____________
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