The standard deviation of the market-index portfolio is 30%. Stock A has a beta of...
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The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50 and a residual standard deviation of 40%.
a. Calculate the total variance for an increase of 0.10 in its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.)
b
Calculate the total variance for an increase of 3.35% in its residual standard deviation? (Do not round intermediate calculations. Round your answer to 4 decimal places.
c.
An investor who currently holds the market-index portfolio decides to reduce the portfolio allocation to the market index to 90% and to invest 10% in stock A. Which of the following changes will have a greater impact on the portfolio's standard deviation?
Increase of .10 in beta.
Increase of 3.35% in residual standard deviation.
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