Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA 2.4%+0.85Rм+ еA = RB -2.4% +1.30Rм + еB = σM = 25%; R-squareA = 0.17; R-square B = 0.11 Break down the variance of each stock to the systematic and firm-specific components. Note: Do not round intermediate calculations. Calculate using numbers NOT in decimal form. For example use "20" for calculation if standard deviation is provided as 20%. Round your answers to nearest whole number. Systematic Firm-specific Risk for A Risk for B

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA 3.2% + 1.10RM + EA RB = -1.4% + 1.25RM + eB OM = 30%; R-squarea = 0.28; R-squareB = 0.12 Break down the variance of each stock to the systematic and firm-specific components. (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.) Risk for A Risk for B Systematic Firm-specific

Suppose the index model for stocks A and B is estimated with the following results:rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB , σM = 20%, and RM = rM − rf . The regressionR2 of stocks A and B is 0.40 and 0.30, respectively.(a) What is the variance of each stock?  (b) What is the firm-specific risk of each stock?  (c) What is the covariance between the two stocks?

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:RA = 3% + .7RM + eARB = −2% + 1.2RM + eBσM = 20%; R-squareA = .20;                    R-squareB = .12Break down the variance of each stock into its systematic and firm-specific components.

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 4.0% + 0.50RM + eA RB= -1.2% + 0.7RM + eB sigmaM= 17% ; R-squareA = 0.26 ; R-squareB= 0.18 Break down the variance of each stock to the systematic and firm-specific components (write in decimal form, rounded to 4 decimal places).    Risk for A Risk for B Systematic     Firm-specific

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

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:   RA = 3.8% + 1.25RM + eA RB = –1.8% + 1.60RM + eB σM = 18%; R-squareA = 0.24; R-squareB = 0.18   What are the covariance and correlation coefficient between the two stocks? (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.)

A stock's beta coefficient can be calculated using the following equation: B₁ = Oi, m σε m a. Write a user-defined function that can calculate the beta coefficient. The argu- ments to the function should be the covariance between the stock and market returns, and the variance of the market's returns. For example, BETA (COVAR AS SINGLE, MARKET VAR AS SINGLE). b. Rewrite your function so that it accepts ranges of returns and then calcu- lates the beta directly from the returns. It should be defined as: BETA(STOCK- RETURNS AS RANGE, MARKETRETURNS AS RANGE). Your function should make use of Application. WorksheetFunction to calculate the covariance and variance (use Excel's COVAR.S and VAR.S functions). In the code, be sure to check to see if the number of stock returns is equal to the number of market returns. The function should return an error if the count of returns is not equal.

Consider the two (excess return) index model regression results for A and B.  RA= 0.9% + 1.1RM , R-square = 0.590, and Residual Standard Deviation = 11% RB= -1.4% + 0.6RM, R-square = 0.456, and Residual Standard Deviation = 9.2% Which stock has more firm-specific risk, market risk, and greater fraction of return variability for market movement? Also, if rf were constant at 4.4% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A (write as percentage, rounded to 2 decimal places)?

You estimated the single index (market) model for stocks P and Q with the following results: Return on Stock P: Rp = 0.04 +0.6RM + ep Return on Stock Q: RQ = 0.04 + 1.4RM + еQ Where RM is return on the single index and ep and eq are error terms which are not correlated with anything and have zero means. In addition, the following statistics are known for RM and the error terms: Mean Risk-free rate 3% Single index return, RM 8% Error term for Stock P return, ep 0% Error term for Stock Q return, eq 0% Standard Deviation 15% 20% 10% Based on the information above, calculate the smallest possible portfolio return standard deviation one can get by forming a two-asset portfolio of Stock P and Q. Hint: Recall the formula for the weight of the minimum variance portfolio. (6 marks) b. Suppose you intend to hold a combined portfolio by allocating 50% in the risk-free asset and the remaining in the minimum variance portfolio (i.e., the risky portfolio you constructed in part a). What is the…