Suppose that the index model for stocks A and B is estimated from excess returns with the following results: Ra = 2.60% + 0.90RM + ea RB = -2.00% + 1.20RM + eB OM = 26%; R-squarea = 0.21; R-squareg = 0.12 Assume you create portfolio Pwith investment proportions of 0.70 in A and 0.30 in B.
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: Ra = 2.60% + 0.90RM + ea RB = -2.00% + 1.20RM + eB OM = 26%; R-squarea = 0.21; R-squareg = 0.12 Assume you create portfolio Pwith investment proportions of 0.70 in A and 0.30 in B.
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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![### Portfolio Analysis Questions
**a. What is the standard deviation of the portfolio?**
*(Do not round your intermediate calculations. Round your answer to 2 decimal places.)*
- **Standard deviation:** [Input Box] %
**b. What is the beta of your portfolio?**
*(Do not round your intermediate calculations. Round your answer to 2 decimal places.)*
- **Portfolio beta:** [Input Box]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff947f14c-7f23-43a5-bcf8-dbada2e40763%2Fa3be8b7d-bc07-4c15-9436-cdbc6c626555%2Fu4cgk6k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Portfolio Analysis Questions
**a. What is the standard deviation of the portfolio?**
*(Do not round your intermediate calculations. Round your answer to 2 decimal places.)*
- **Standard deviation:** [Input Box] %
**b. What is the beta of your portfolio?**
*(Do not round your intermediate calculations. Round your answer to 2 decimal places.)*
- **Portfolio beta:** [Input Box]
![Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
\[ R_A = 2.60\% + 0.90 R_M + e_A \]
\[ R_B = -2.00\% + 1.20 R_M + e_B \]
\[ \sigma_M = 26\%; \; R\text{-square}_A = 0.21; \; R\text{-square}_B = 0.12 \]
Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff947f14c-7f23-43a5-bcf8-dbada2e40763%2Fa3be8b7d-bc07-4c15-9436-cdbc6c626555%2Fc9p92j9_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:
\[ R_A = 2.60\% + 0.90 R_M + e_A \]
\[ R_B = -2.00\% + 1.20 R_M + e_B \]
\[ \sigma_M = 26\%; \; R\text{-square}_A = 0.21; \; R\text{-square}_B = 0.12 \]
Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.
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