Suppose that the index model for stocks A and B is estimated from excess returns with the following results:\

R_(A)=1.00%+0.45R_(M)+e_(A)\ R_(B)=-1.00%+1.00R_(M)+e_(B)\ \\\\sigma _(M)=16%;R-square _((

)

A)=0.28;R - square _((

)

B)=0.21

\ Assume you create portfolio

P

with investment proportions of 0.60 in

A

and 0.40 in

B

.\ Required:\ a. What is the standard deviation of the portfolio?\ Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal\ form, not percentages. For example use "20" for calculation if standard deviation is provided as

20%

.\ b. What is the beta of your portfolio?\ Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal\ form, not percentages. For example use "20" for calculation if standard deviation is provided as

20%

.\ c. What is the firm-specific variance of your portfolio?\ Note: Do not round your intermediate calculations. Round your answer to 3 decimal places. Calculate using numbers in decimal\ form, not percentages. For example use "20" for calculation if standard deviation is provided as

20%

.\ d. What is the covariance between the portfolio and the market index?\ Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal\ form, not percentages. For example use "20" for calculation if standard deviation is provided as

20%

.

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA=1.00%+0.45RM+eARB=1.00%+1.00RM+eBM=16%;R-squareA=0.28;R-squareB=0.21 Assume you create portfolio P with investment proportions of 0.60 in A and 0.40 in B. Required: a. What is the standard deviation of the portfolio? Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. b. What is the beta of your portfolio? Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. c. What is the firm-specific variance of your portfolio? Note: Do not round your intermediate calculations. Round your answer to 3 decimal places. Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. d. What is the covariance between the portfolio and the market index? Note: Do not round your intermediate calculations. Round your answer to 2 decimal places. Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%