Suppose that the index model for stocks A and B is estimated from excess returns with the following results:RA= 4.0% + 0.50RM + eARB = -1.2% + 0.70RM + eB= 17%; R-squarea = 0.26; R-squareB0.18Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill.Portfolio Pis composed of 70% Stock A and 30% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not roundintermediate calculations. Round your answer to 2 decimal places.)Standard deviationb. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Portfolio beta

The measure of amount of variation of a set of values is called as standard deviation. It is the sum…

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% + 0.70RM + eB OM = 17%; R-squarea = 0.26; R-squareB = 0.18 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio Pis composed of 70% Stock A and 30% Stock B.

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% + 0.70RM + eB OM = 17%; R-squarea = 0.26; R-squareB = 0.18 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio Pis composed of 70% Stock A and 30% Stock B.

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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