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?

Expert Solution

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jeff jeffy answered 1 year ago

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Suppose that the index model for stocks A and B is estimated from excess returns with...

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