Question
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 3% + .7R
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
- RA = 3% + .7RM + eA
- RB = -2% + 1.2RM + eB
- M = 20%; R-squareA = .20; R-squareB = .12
Question 7:What is the standard deviation of Stock A?
Question 8: What is the standard deviation of Stock B?
Question 9: Break down the variance of Stock A to the systematic risk components.
Question 10: Break down the variance of Stock A to the firm-specific risk components.
Question 11: Break down the variance of Stock B to the systematic risk component
Question 12: Break down the variance of Stock B to the firm-specific risk components.
Question 13: What is the covariance between the two stocks?
Question 14: What is the correlation coefficient between the two stocks?
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