c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.) Firm-specific d. What is the covariance between the portfolio and the market index? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Covariance
c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.) Firm-specific d. What is the covariance between the portfolio and the market index? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Covariance
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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![c. What is the "firm-specific" risk of portfolio Q? *(Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.)*
[Input box labeled "Firm-specific"]
d. What is the covariance between the portfolio and the market index? *(Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.)*
[Input box labeled "Covariance"]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff947f14c-7f23-43a5-bcf8-dbada2e40763%2F04494989-f3b3-488e-8d39-6852e98c1ae4%2Fbacjtm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:c. What is the "firm-specific" risk of portfolio Q? *(Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.)*
[Input box labeled "Firm-specific"]
d. What is the covariance between the portfolio and the market index? *(Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.)*
[Input box labeled "Covariance"]
![Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
\[ R_A = 4.0\% + 0.50R_M + e_A \]
\[ R_B = -1.2\% + 0.70R_M + e_B \]
\(\sigma_M = 17\%\); \(R\text{-square}_A = 0.26\); \(R\text{-square}_B = 0.18\)
Assume you create a portfolio \( Q \), with investment proportions of 0.40 in a risky portfolio \( P \), 0.35 in the market index, and 0.25 in T-bill. Portfolio \( P \) is composed of 70% Stock \( A \) and 30% Stock \( B \).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff947f14c-7f23-43a5-bcf8-dbada2e40763%2F04494989-f3b3-488e-8d39-6852e98c1ae4%2Fifoynb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
\[ R_A = 4.0\% + 0.50R_M + e_A \]
\[ R_B = -1.2\% + 0.70R_M + e_B \]
\(\sigma_M = 17\%\); \(R\text{-square}_A = 0.26\); \(R\text{-square}_B = 0.18\)
Assume you create a portfolio \( Q \), with investment proportions of 0.40 in a risky portfolio \( P \), 0.35 in the market index, and 0.25 in T-bill. Portfolio \( P \) is composed of 70% Stock \( A \) and 30% Stock \( B \).
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