Question
In: Finance
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA = 2.50% + 0.60RM + eA
RB = -1.50% + 0.70RM + eB
σM = 19%; R-squareA = 0.24; R-squareB = 0.18
Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.
a. What is the standard deviation of the
portfolio? (Do not round your intermediate
calculations. Round your answer to 2 decimal
places.)
b. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)
c. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.)
d. What is the covariance between the portfolio and the market index?
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 5.0% + 1.30RM + eA
RB = –2.0% + 1.6RM + eB
σM = 20%; R-squareA = 0.20; R-squareB = 0.12
Break down the variance of each stock to the systematic and
firm-specific components. (Do not round intermediate calculations.
Calculate using numbers in decimal form, not percentages. Round
your answers to 4 decimal places.)
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 2.6% + 0.90RM +
eA
RB = –2.0% + 1.20RM +
eB
σM = 26%;
R-squareA = 0.21;
R-squareB = 0.12
Assume you create a portfolio Q, with investment
proportions of 0.40 in a risky portfolio P, 0.35 in the
market index, and 0.25 in T-bill. Portfolio P is composed
of 70% Stock A and 30% Stock B.
a....
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 1.60% + 0.70RM +
eA
RB = -1.80% + 0.90RM +
eB
σM = 22%;
R-squareA = 0.20;
R-squareB = 0.15
Assume you create portfolio P with investment proportions
of 0.70 in A and 0.30 in B.
a. What is the standard deviation of the
portfolio? (Do not round your intermediate
calculations. Round your answer to 2 decimal
places.)...
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 3.60% + 1.20RM +
eA
RB = -1.60% + 1.50RM +
eB
σM = 16%;
R-squareA = 0.25;
R-squareB = 0.15
Assume you create portfolio P with investment proportions
of 0.70 in A and 0.30 in B.
a. What is the standard deviation of the
portfolio? (Do not round your intermediate
calculations. Round your answer to 2 decimal
places.)...
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 2.20% + 0.80RM +
eA
RB = -2.20% + 1.20RM +
eB
σM = 24%;
R-squareA = 0.16;
R-squareB = 0.12
Assume you create portfolio P with investment
proportions of 0.70 in A and 0.30 in B.
a. What is the standard deviation of the
portfolio? (Do not round your intermediate
calculations. Round your answer to 2 decimal
places.)...
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 2.50% + 0.95RM + eA RB = -1.80% + 1.10RM + eB σM = 27%;
R-squareA = 0.23; R-squareB = 0.11
Assume you create portfolio P with investment proportions of
0.60 in A and 0.40 in B.
a. What is the standard deviation of the portfolio? (Do not
round your intermediate calculations. Round your answer to 2
decimal places.)...
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 5.00% + 1.30RM + eA RB = -2.00% + 1.60RM + eB σM = 20%;
R-squareA = 0.20; R-squareB = 0.12
Assume you create portfolio P with investment proportions of
0.70 in A and 0.30 in B.
a. What is the standard deviation of the portfolio?
b. What is the beta of your portfolio?
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and B is estimated
from excess returns with the following results:
RA = 2.4% + 0.85RM +
eA
RB = –2.4% + 1.30RM +
eB
σM = 25%;
R-squareA = 0.17;
R-squareB = 0.11
Assume you create a portfolio Q, with investment
proportions of 0.50 in a risky portfolio P, 0.30 in the
market index, and 0.20 in T-bill. Portfolio P is composed
of 60% Stock A and 40% Stock B.
a....
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and
B is estimated from excess returns with the following
results:
RA = 1.8% + 0.75RM +
eA
RB = -2.0% + 1.1RM +
eB
σM = 23%;
R-squareA = 0.18;
R-squareB = 0.10
What is the covariance between each stock and the market index?
(Calculate using numbers in decimal form,
not percentages. Do not round your intermediate
calculations. Round your answers to 3 decimal places.)
Suppose that the index model for stocks A and B is estimated from excess returns with...
Suppose that the index model for stocks A and
B is estimated from excess returns with the following
results:
RA = 3.5% + 0.65RM +
eA
RB = –1.6% + 0.80RM +
eB
σM = 21%;
R-squareA = 0.22;
R-squareB = 0.14
What are the covariance and correlation coefficient between the
two stocks? (Do not round intermediate calculations.
Calculate using numbers in decimal form, not percentages. Round
your answers to 4 decimal places.)
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Write in Python and as 2 seperate programs Write a program that allows the user to...
- Asymptotic Notation. (a) [10 pts.] Prove that n3 −91n2 −7n−14 = Ω(n3). Your answer must clearly...
- Prepare ONE Page reflection to the readings of the Perceptual Process incorporating as well one outside...
- How is the internet affecting our everyday life? I just need a rough draft for this...
- Please explain your view of the most difficult aspect of Customs Compliance?
- You are required to write an interactive program that prompts the user for seven (7) real...
- Describe in detail the five-forces model of industry competition. What causes each of the forces to...
ADVERTISEMENT