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  3. suppose that the index model for stocks a and b is

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

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Finance

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

RA = 2.5% + 0.95RM + eA
RB = 1.8% + 1.1RM + eB
M = 27%; R-squareA = 0.23; R-squareB = 0.11

Assume you create Portfolio P with investment proportions of .60 in A and .40 in B.

A)What is the standard deviation of your portfolio?

B)what is the beta of your portfolio?

C)what is the firm specific variance of your portfolio

D)what is the covariance between the portfolio and the market index?

please show work

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