What is the standard deviation of the rate of return of l

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Consider a 2-factor market with two widely diversified portfolios L and M. Factor loadings are b L1 = 2, b L2 = 0.2, b M1 = 0.5, b M2 = 3. The two factors have standard deviations σ 1 = 3%, σ 2 = 6%. The correlation between the factors is 0.4. What is the standard deviation of the rate of return of L?

Reference no: EM132752693

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