50.1K

Verified Solution

Link Copied!

Suppose that the index model for stocks A and B is estimated from excess returns with the following results. | RA = .2 .1M CA RB = -1.4% +1.25RM es ON - 30%; R-square - 0.28; R-squareg - 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 Pis composed of 70% Stock A and 30% Stock B. 6. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation - What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta 0.80 c. What is the "firm-specific risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.) Firm-specific d. What is the covariance between the portfolio and the market index? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Covariance 0.07 Suppose that the index model for stocks A and B is estimated from excess returns with the following results. | RA = .2 .1M CA RB = -1.4% +1.25RM es ON - 30%; R-square - 0.28; R-squareg - 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 Pis composed of 70% Stock A and 30% Stock B. 6. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation - What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta 0.80 c. What is the "firm-specific risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.) Firm-specific d. What is the covariance between the portfolio and the market index? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Covariance 0.07

Answer & Explanation Solved by verified expert

See Answer