Question
Suppose that the index model for stocks A and B is estimated from excess returns with the following results R A = 3.2% + 1.10
Suppose that the index model for stocks A and B is estimated from excess returns with the following results
| RA = 3.2% + 1.10RM + eA | |
| RB = 1.4% + 1.25RM + eB | |
| M = 30%; R-squareA = 0.28; R-squareB = 0.12 |
| Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B |
| 1. | What is the standard deviation of the portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
| 2. | What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) |
| 3. | What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.) |
| 4. | What is the covariance between the portfolio and the market index? |
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The FinTech Book The Financial Technology Handbook For Investors Entrepreneurs And Visionaries
Authors: Susanne Chishti, Janos Barberis
1st Edition
111921887X, 9781119218876
