Problem 6-5 (Algo) The standard deviation of the market-index portfolio is 40%. Stock A has a beta of 1.50 and a residual standard deviation of 50%. Required: a. Calculate the total variance for an increase of 0.25 in its beta. Note: Do not round intermediate calculations. Answer is complete and correct. Total variance 0.7400 b. Calculate the total variance for an increase of 49.38 percentage points in its residual standard deviation. Note: Do not round intermediate calculations. Total variance Answer is not complete.
Problem 6-5 (Algo) The standard deviation of the market-index portfolio is 40%. Stock A has a beta of 1.50 and a residual standard deviation of 50%. Required: a. Calculate the total variance for an increase of 0.25 in its beta. Note: Do not round intermediate calculations. Answer is complete and correct. Total variance 0.7400 b. Calculate the total variance for an increase of 49.38 percentage points in its residual standard deviation. Note: Do not round intermediate calculations. Total variance Answer is not complete.
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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Transcribed Image Text:Problem 6-5 (Algo)
The standard deviation of the market-index portfolio is 40%. Stock A has a beta of 1.50 and a residual standard deviation of 50%.
Required:
a. Calculate the total variance for an increase of 0.25 in its beta.
Note: Do not round intermediate calculations.
Answer is complete and correct.
Total variance
0.7400
b. Calculate the total variance for an increase of 49.38 percentage points in its residual standard deviation.
Note: Do not round intermediate calculations.
Total variance
Answer is not complete.
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