Suppose that the index model for stocks A and Bis 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-squareg = 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 that the index model for stocks A and Bis 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-squareg = 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

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 3.6 % + 1.20RM + eA RB = -1.6 % +1.50RM + eg OM = 16%; R-squareA = 0.25; R-squareg = 0.15 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 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-squareg = 0.18 Break down the variance of each stock to the systematic and firm-specific components. Note: Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. 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 = 2.5% + 0.95RM + eA RB = -1.8% + 1.10RM + eB OM = 27%; R-squareд = 0.23; R-squareB = 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 in decimal form, not percentages. 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 = 3.8% + 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.)
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 = 4.0% +0.50RM + eA RB = -1.2% + 0.70RM + eB \sigma M = 17%; R-squareA = 0.26; R-squareB = 0.18 Break down the variance of each stock to the systematic and firm - specific components. Note: Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Round your answers to nearest whole number.
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 5.0% +1.30RM + еA RB = -2.0% + 1.60RM + еB ом = 20%; R-squareд = 0.20; R-squareB 0.12 = Break down the variance of each stock to the systematic and firm-specific components. Note: Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. 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 0 0 0 1
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 = 3.6% + 1.2RM + eA RB = -1.6% + 1.5RM + eB OM = 16%; R-squarea = 0.25; R-square; = 0.15 What is the covariance between each stock and the market index? (Calculate using numbers in decimal form, not percentages. Do not round your intermediate calculations. Round your answers to 3 decimal places.) Covariance Stock A Stock B
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 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. Answer the following questions. (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 = 3.2% + 1.10RM + eA RB = –1.4% + 1.2RM + eB σM = 30%; R-squareA = 0.28; R-squareB = 0.12 What is the standard deviation of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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