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The standard deviation of the returns on a stock is 25% and the standard deviation of the market is 20%. The risk-free rate is 6%.
The standard deviation of the returns on a stock is 25% and the standard deviation of the market is 20%. The risk-free rate is 6%. The beta for the stock is 0.80, and the market risk premium is 8%. According to the market model, what proportion of the stock's variance is explained by the market?
a. | 64% | |
b. | 41% | |
c. | 20% | |
d. | 36% |
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