What is the standard deviation of the portfolio

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Reference no: EM131448456

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

RA = 2.2% + 0.80RM + eA

RB = –2.2% + 1.2RM + eB

σM = 24%; R-squareA = 0.16; R-squareB = 0.12

Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.

1. What is the standard deviation of the portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Standard deviation ______%??

2. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)

Portfolio beta _______

3. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.)

Firm-specific _________

4. What is the covariance between the portfolio and the market index? (Do not round your intermediate calculations. Round your answer to 3 decimal places.)

Covariance ________

Reference no: EM131448456

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