Question
The standard deviation of the market index is 25%, and the regression analysis of the single index model for Stocks A and B show the
The standard deviation of the market index is 25%, and the regression analysis of the single index model for Stocks A and B show the following results:
RA = 0.01 +1.39RM +eA , R2 =56%
RB = 0.01 +0.8RM +eB , R2 =72%
The covariance between Stock A and Stock B is _________ %.( round your answer to two decimal places)
Assume CAPM holds. Which of the following statements are correct?
Check All That Apply
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Stocks with zero betas have expected return equal to the risk-free rateStocks with zero betas have expected return equal to the risk-free rate
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A security with high volatility must have high beta.A security with high volatility must have high beta.
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A portfolio comprised of high-beta securities must have high beta.A portfolio comprised of high-beta securities must have high beta.
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You can create a portfolio with beta=0.8 by investing 80% of the fund in the market index and 20% of the fund in T-billsYou can create a portfolio with beta=0.8 by investing 80% of the fund in the market index and 20% of the fund in T-bills
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The expected return of a negative-beta asset should be negative.The expected return of a negative-beta asset should be negative.
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A negative-beta asset can be used for hedging market risk.A negative-beta asset can be used for hedging market risk.
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