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 =0.03 + 0.7RM + eA

RB = -0.02 + 1.2RM + eB

σM = 0.2

R-squareA = 0.3;

R-squareB = 0.25

Assume you create for portfolio Q with investment proportions of 0.50 in P, 0.30 in the market index, and 0.20 in T-bills, portfolio P is composed of 60% Stock A and 40% Stock B. What is the standard deviation of the portfolio Q?

0.2766

0.1831

0.4800

0.2556

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

ANSWER : 0.1831

jeff jeffy answered 1 year ago
Next > < Previous

Related 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
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT