Question
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 1.6% + 0.70
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA = 1.6% + 0.70RM + eA
RB = 1.8% + 0.9RM + eB
M = 22%; R-squareA = 0.20; R-squareB = 0.15
Break down the variance of each stock to the systematic and firm-specific components. (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.)
risk for A risk for B
systematic
firm specific
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
