What is the standard deviation of return

Assignment Help Finance Basics
Reference no: EM132999686

Given the single factor model r = E(r) + bF + ε for which 340 stocks rely to generate their returns where F is a factor and b is the factor loading and ε is idiosyncratic error. Stock A which is one of the 340 stocks has an expected return of 7% , a factor loading of b = 0.03, a factor F with a mean of zero following a variance of 1 and a standard deviation of idiosyncratic error of 37%. These characteristics are the same for all the 340 stocks. Risk free rate is 3%. The portfolio we hold has equal weight on each stock and places nothing on the risk-free asset.

Question: What is the standard deviation of return on this portfolio and what is the covariance of the stock return with the return of the portfolio ?

Reference no: EM132999686

Questions Cloud

What the accounts receivable turnover : The Accounts Receivable balances at the beginning and end of the year were $606000 and $710000, respectively. What the accounts receivable turnover
What information would need to collect in order to test : What information would you need to collect in order to test each hypothesis or answer each research question? Explain this for each hypothesis/question.
Determine by how much the total shareholders equity changed : Determine by how much (one figure; supporting calculations) the total shareholders' equity changed from December 31, 2019 to March 31, 2020
How would effectively implement a data library for police : How would you effectively implement a data library for police officers that contained all necessary policies, procedures, and regulations?
What is the standard deviation of return : Question: What is the standard deviation of return on this portfolio and what is the covariance of the stock return with the return of the portfolio?
How would effectively implement the channels : Do you believe that the communication process utilized by the chief of police was an effective way of communicating this information to the officers?
What will be the beta of the new merged firm : If Simpson is going to make up 67% of the new firm (and Lachey will comprise the remaining 33%), what will be the beta of the new merged firm
What evidence would collect at the crime scene : What evidence and/or samples would you collect at the crime scene? How would the examination of this evidence assist in the investigation of the crime?
What the arianna estate assets total : Superannuation of $60,000 (binding death benefit nomination to her daughter, Suzy) Based on the above assets, what the Arianna's estate assets total

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd