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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.60% + 0.90RM +

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.60% + 0.90RM + eA RB = -2.00% + 1.20RM + eB M = 26%; R-squareA = 0.21; R-squareB = 0.12. Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.

What is the standard deviation of the portfolio?

Beta of the portfolio?

Firm-specific variance?

Covariance?

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