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Suppose the index model for stocks X and Y is estimated from excess returns with the following results: Rx = 0.015 + 0.75Rm +ex R-square(x)

Suppose the index model for stocks X and Y is estimated from excess returns with the following results:

Rx = 0.015 + 0.75Rm +ex

R-square(x) = 0.15

Ry = -0.015 + 1.2Rm +ey

R-square(y) = 0.12

The market index has a standard deviation of 0.22.

What is the standard deviation of stock X?

Answer for part 1

What is the standard deviation of stock Y?

Answer for part 2

How much is the firm-specific component of the variance of stock X?

Answer for part 3

How much is the firm-specific component of the variance of stock Y?

Answer for part 4

What is the covariance between the two stocks?

Answer for part 5

What is the correlation coefficient between the two stocks?

Answer for part 6

What is the covariance between stock X and the market index?

Answer for part 7

What is the covariance between stock Y and the market index?

Answer for part 8

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