The following are estimates for two stocks. Firm- Specific Standard Deviation 34% 44 Expected Stock Return A B 8% 17 Stock A Stock B T-bills Beta 0.90 1.45 The market index has a standard deviation of 22% and the risk-free rate is 10%. Required: a. What are the standard deviations of stocks A and B? b. Suppose that we were to construct a portfolio with proportions: 0.40 0.40 0.20 Compute the expected return, beta, nonsystematic standard deviation, and standard deviation of the portfolio.

The following are estimates for two stocks. Firm- Specific Standard Deviation 34% 44 Expected Stock Return A B 8% 17 Stock A Stock B T-bills Beta 0.90 1.45 The market index has a standard deviation of 22% and the risk-free rate is 10%. Required: a. What are the standard deviations of stocks A and B? b. Suppose that we were to construct a portfolio with proportions: 0.40 0.40 0.20 Compute the expected return, beta, nonsystematic standard deviation, and standard deviation of the portfolio.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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