Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standarddeviation of each stock's returns is 20%. The stocks' returns areindependent of each other, i.e., the correlation coefficient, r, betweenthem is zero. Portfolio P consists of 50% X and 50% Y. Given thisinformation, which of the following statements is CORRECT?1) Portfolio P has a standard deviation of 20%.2) The required return on Portfolio P is equal to the market riskpremium (RM - TRF).3) Portfolio P has a beta of 0.7.4)Portfolio P has a beta of 1.0 and a required return that is equalto the riskless rate, TRF.Portfolio P has the same required return as the market (rm).5)

Standard deviation is the deviation from the means return and shows the risk related to over all…

1) Portfolio P has a standard deviation of 20%. (2) The required return on Portfolio P is equal to the market risk premium (rM - TRF). 3) Portfolio P has a beta of 0.7. 4) Portfolio P has a beta of 1.0 and a required return that is equa to the riskless rate, TRF. Portfolio P has the same required return as the market (rm). 5)

1) Portfolio P has a standard deviation of 20%. (2) The required return on Portfolio P is equal to the market risk premium (rM - TRF). 3) Portfolio P has a beta of 0.7. 4) Portfolio P has a beta of 1.0 and a required return that is equa to the riskless rate, TRF. Portfolio P has the same required return as the market (rm). 5)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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Similar questions

A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the correlation coefficient between Stock X and Stock Y? Select one: a. 0.60 b. 0.50 c. 1.00 d. 0.00 e. 0.40
The index model has been estimated for stock A with the following results: RA = 0.01 + 1.2RM + eA. σM = 0.15; σ(eA) = 0.10. The standard deviation of the return for stock A is
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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 0.03 + 0.7 RM + eA RB = -0.02+ 1.2 RM + eB σM =0.20; R-square A = 0.25 R-square B = 0.20 What is the standard deviation of A & B, respectively? Group of answer choices 0.54, 0.28 0.28, 0.54 0.45, 0.50 0.50, 0.45
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