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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 5.0% + 1.30
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 5.0% + 1.30RM + eA RB = 2.0% + 1.60RM + eB M = 20%; R-squareA = 0.20; R-squareB = 0.12 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio P is composed of 70% Stock A and 30% Stock B.
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA - 5.ex. 1.38R CA R-2.0%+ 1.6ORM. 48 ON 20; R-square - 0.20; R-squareg - 0.12 Assume you create a portfolio Q with investment proportions of 0.40 in a risky portfolio P. 0.35 in the market index, and 0.25 in T-bill. Portfolio Pis composed of 70% Stock A and 30% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Standard deviation 21.78 % % a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Standard deviation 21.783 % b. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Portfolio beta 1.09 x c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round Intermediate calculations. Round your answer to 4 decimal places.) Answer is complete but not entirely correct. Fim-specific 12.7645 d. What is the covariance between the portfolio and the market index? (Calculate using numbers Do not round Intermediate calculations. Round your answer to 2 decimal places.) decimal form, not percentages. Answer is complete but not entirely correct. Covariance 0.22Step by Step Solution
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