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Question 5 In a single-index model, the following table gives the expected returns, alphas (a), standard deviation (o), beta (3) and firm-specific standard deviation (o)
Question 5 In a single-index model, the following table gives the expected returns, alphas (a), standard deviation (o), beta (3) and firm-specific standard deviation (o) for the market, the risk-free asset, the three stocks A. B and C, all in annualized terms. Asset A B Market Risk-free O 15% O 5% O 10% E[r] O 12.5% 10.0% 5.0% 0.0% 5.0% -5.0% 10.0% O 30.0% 100.0% 20.0% 1.00 20 pts 0.50 Find the expected return of Asset A. 6 JE 40.0%
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