3. Answer ALL parts of this question. The data below describes a three-stock financial market that satisfies the single index model. Stock Capitalization Beta Mean Excess Return Standard Deviation A £3,000 1.0 10% 40% B £1,940 0.2 2% 30% C £1,360 1.7 17% 50% The standard deviation of the market inde portfolio is 25%. (a) What is the mean excess return of the index portfolio? (b) What is the covariance between stock and stock B? (c) What is the covariance between stock and the index? (d) Break down the variance of stock B int its systematic and firm specific components.
3. Answer ALL parts of this question. The data below describes a three-stock financial market that satisfies the single index model. Stock Capitalization Beta Mean Excess Return Standard Deviation A £3,000 1.0 10% 40% B £1,940 0.2 2% 30% C £1,360 1.7 17% 50% The standard deviation of the market inde portfolio is 25%. (a) What is the mean excess return of the index portfolio? (b) What is the covariance between stock and stock B? (c) What is the covariance between stock and the index? (d) Break down the variance of stock B int its systematic and firm specific components.
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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Please solve it on a paper by showing the formula. I need help with part b and C.
Transcribed Image Text:03:37 o
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A £3,000 1.0 10% 40%
B £1,940 0.2 2% 30%
*4+ 4%
个
3. Answer ALL parts of this question.
The data below describes a three-stock
financial market that satisfies the single
index model.
Stock Capitalization Beta Mean Excess
Return Standard Deviation
14 :
|||
C £1,360 1.7 17% 50%
The standard deviation of the market index
portfolio is 25%.
(a) What is the mean excess return of the
index portfolio?
(b) What is the covariance between stock A
and stock B?
(c) What is the covariance between stock B
and the index?
(d) Break down the variance of stock B into
its systematic and firm specific
components.
CHA
SAVE
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