Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA=1.5ee+0.55RM+eARB=1.40K+0.60RN+eBN=185;R-squareA=0.25;RsquareB=0.16 Assume you create portiolio P

image text in transcribed
image text in transcribed
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA=1.5ee+0.55RM+eARB=1.40K+0.60RN+eBN=185;R-squareA=0.25;RsquareB=0.16 Assume you create portiolio P with investment proportions of 0.60 in A and 0.40 if IB Required: a. What is the standard deviation of the portfollo? Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal form, not percentages, For example use " 20 for calculation if standard deviation is provided as 20%. b. What is the beta of your portiolio? Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal form, not percentages. For example use " 20 " for calculation if standard deviation is provided as 20%. c. What is the firm-specific variance of your portfolio? Note: Do not round your intermediate calculations. Round your answer to 3 decimal places. Calculate using numbers in decimal form, not percentages. For example use " 20 for calculation if standard deviation is provided as 20%. d. What is the covariance between the nortfolio and the market index? form, not percentages. For example use " 20 " for calculation if standard deviation is provided as 20%. d. What is the covariance between the portfolio and the market index? Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal form, not percentages. For example use " 20 " for calculation if standard deviation is provided as 20%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Consumer Finance Research

Authors: Jing J. Xiao

1st Edition

1441926046, 978-1441926043

More Books

Students also viewed these Finance questions