Q.3. The following table gives data on four stocks: Stock Alpha A 1.1 B 1.3 C 2.3 D 0.5 Systematic Variance 21.5 16 25 13 Unsystematic Variance 40 50 30 45 The market is expected to have a 14% return with a return variance of 16%². Using Sharpe's Single Index Model, calculate the expected return and risk for a portfolio assuming equal proportion of each of the stock.
Q.3. The following table gives data on four stocks: Stock Alpha A 1.1 B 1.3 C 2.3 D 0.5 Systematic Variance 21.5 16 25 13 Unsystematic Variance 40 50 30 45 The market is expected to have a 14% return with a return variance of 16%². Using Sharpe's Single Index Model, calculate the expected return and risk for a portfolio assuming equal proportion of each of the stock.
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:Q.3. The following table gives data on four stocks:
Systematic
Stock Alpha Variance
Unsystematic
Variance
А
1.1
21.5
40
1.3
16
50
2.3
25
30
0.5
13
45
The market is expected to have a 14% return with a return variance of 16%. Using
Sharpe's Single Index Model, calculate the expected return and risk for a portfolio
assuming equal proportion of each of the stock.
ABCA
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