Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.50%

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answerhappygod
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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.50%

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Suppose that the index model for stocks A and B is estimatedfrom excess returns with the following results:RA = 1.50% +0.55RM + eARB = -1.40% +0.60RM + eBσM =18%; R-squareA =0.25; R-squareB = 0.16Assume you create portfolio P with investmentproportions of 0.60 in A and 0.40in B.a. What is the standard deviation of theportfolio? (Do not round your intermediatecalculations. Round your answer to 2 decimalplaces.)
b. What is the beta of yourportfolio? (Do not round your intermediatecalculations. Round your answer to 2 decimalplaces.)
c. What is the firm-specific variance of yourportfolio? (Do not round your intermediatecalculations. Round your answer to 4 decimalplaces.)
d. What is the covariance between theportfolio and the market index? (Do not round yourintermediate calculations. Round your answerto 3 decimal places.)
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