Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. assume single index model applies to multiple choi

Assume Single Index Model applies to multiple choice questions 1, 2 and 3. Suppose that...

50.1K

Verified Solution

Question

Finance

Assume Single Index Model applies to multiple choice questions 1, 2 and 3. Suppose that Market Index return has standard deviation of 20% and that the risk-free rate is 3%. Further, suppose that we have two stocks A and B with the following characteristics:

Stock

Expected Return

Beta

Firm-specific Standard Deviation

A

12%

0.5

30%

B

17%

1.9

50%

Now suppose that an investor (Peter) decides to combine Stocks A, B and the risk-free asset in a portfolio using the following weights: Stock A: 40%, Stock B: 50%, Risk-free asset: 10%

1. What is the standard deviation of Stock Bs return?

A. 82.40

B. 13.60

C. 80.90

D. 62.80

E. 120.10

12. Beta of Peters portfolio is,

A. 1.90

B. 1.20

C. 1.15

D. 1.00

E. 0

3. The non-systematic variance of Peters portfolio is,

A. 405

B. 769

C. 1012

D. 1507

E. none of the above

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Biology
1.2K views

Explain the raise of slavery in the cheasapeake

Psychology
1.2K views

discuss the pros and cons of both the crime fighter approach and the public servant approach....

Biology
1.2K views

Which statement best supports the information in this diagram Human Dog This Photo by Unknown...

Biology
1.2K views

Consider the following reaction Glucose 6 phosphate Fructose 6 Phosphate This essential step in glycolysis...

Basic Math
1.2K views

18 03 39 91 20 53 43 95 65 48 17 96 42 91 16...

Statistics
1.2K views

quadratic regression using a graphing calculator to determine a quadratic function that could be used...

Accounting
1.2K views

current attempt in progress splish brothers corporation has 3600 preferred shares that have been issued...

Accounting
1.2K views

Force F acts on X on the cantilever beam. F and X Message of moment...

Accounting
1.2K views

Budgeting Inventories For each independent situation below, determine the missing amounts

Accounting
1.2K views

Puriodic inventury by three methods; cont of goods yold The evite of ba item avitable...

Accounting
1.2K views

The company did not issue any new common stock during the year. A toth of...

Accounting
1.2K views

what is the solution to this problem? 7. Barry Corporation...