Question
The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 2.00 and a residual standard deviation of 50%. a-1. Calculate
| The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 2.00 and a residual standard deviation of 50%. |
| a-1. | Calculate the total variance for an increase of 0.20 in its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.) |
| Total variance |
| a-2. | Calculate the total variance for an increase of 7.06% in its residual standard deviation? (Do not round intermediate calculations. Round your answer to 4 decimal places.) |
| Total variance |
| b. | An investor who currently holds the market-index portfolio decides to reduce the portfolio allocation to the market index to 90% and to invest 10% in stock A. Which of the following changes will have a greater impact on the portfolio's standard deviation? | ||||
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Port Infrastructure Finance
Authors: Hilde Meersman, Eddy Van De Voorde, Thierry Vanelslander
1st Edition
0415720060, 978-0415720069
