What is the firm-specific variance of your portfolio

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Reference no: EM131873442

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

RA = 1.8% + 0.75RM + eA

RB = -2.0% + 1.1RM + eB

σM = 23%; R-squareA = 0.18; R-squareB = 0.10

Assume you create portfolio P with investment proportions of 0.60 in A and 0.40 in B.

a. What is the standard deviation of the portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)

Standard Deviation %

b. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)

Portfolio Beta

c. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.)

Firm-Specific

d. What is the covariance between the portfolio and the market index? (Do not round your intermediate calculations.Round your answer to 3 decimal places.)

Covariance

Reference no: EM131873442

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