Problem $6-5($Algo$)$

points

The standard deviation of the market$-$index portfolio is $40\%.$ Stock A has a beta of $1\mathrm{.}50$ and a residual standard deviation of $50\%.$

Required:

a$.$ Calculate the total variance for an increase of $0\mathrm{.}25$ in its beta.

Note: Do not round intermediate calculations.

Answer is complete and correct.

$\begin{array}{cc}\text{T}\text{o}\text{t}\text{a}\text{l}\text{v}\text{a}\text{r}\text{i}\text{a}\text{n}\text{c}\text{e}& 0\mathrm{.}7400\end{array}$

b$.$ Calculate the total variance for an increase of $49\mathrm{.}38$ percentage points in its residual standard deviation.

Note: Do not round intermediate calculations.

Answer is not complete.