What are the systematic risk and unsystematic risk of stock

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Stock X is lying on the SML and its expected return in the market is 10%. Stock Y is 1.5% above the SML and its expected return in the market is 8%. The standard deviation of the market portfolio and Stock X are 12% and 22% respectively. The market price of risk is 5% and the risk-free return is 2%.

a) What are the beta of Stock X and Stock Y?

b) What are the systematic risk and unsystematic risk of Stock X? Please answer in %^2.

c) What is the correlation coefficient and covariance between Stock X and market portfolio?

d) Assume you form a portfolio comprises 60% in Stock X and 40% in market portfolio, what are the systematic risk and variance of the portfolio? Please answer in %^2.

Reference no: EM131536244

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