Business, 24.02.2020 20:51 robert7248

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.0% + 0.45RM + eA RB = –1.0% + 1.00RM + eB σM = 16%; R-squareA = 0.28; R-squareB = 0.21 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. 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.)
b. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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.)
d. What is the covariance between the portfolio and the market index?

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

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