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What are the standard deviations of stocks A and B

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Reference no: EM133048848

Question - The following are the estimates for two stocks:

Stock

Expected returns

Beta

Firm-specific standard deviation

A

12%

0.9

30%

B

19%

1.3

40%

The market index has a standard deviation of 23% and the risk-free rate is 7%.

Required -

(a) What are the standard deviations of stocks A and B?

(b) Suppose that we were to construct a portfolio with proportions:

Stock A: 0.30

Stock B: 0.45

T-bills: 0.25

Reference no: EM133048848

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