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?

Group of answer choices

0.2556

0.2766

0.4800

0.1831

Solutions

Expert Solution

ANSWER = 0.1831

jeff jeffy answered 1 year ago
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