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andrew11 [14]
3 years ago
6

The standard deviation of the market-index portfolio is 25%. Stock A has a beta of 1.80 and a residual standard deviation of 35%

. a. Calculate the total variance for an increase of 0.20 in its beta. (Do not round intermediate calculations. Round your answer to the nearest whole number.)
Business
1 answer:
kap26 [50]3 years ago
7 0

Answer:

0.2925

Explanation:

Total variance = Systematic variance + Residual variance

= (β^2)Var(rM) + Var(e)

Where beta β= 1.80 and

residual standard deviation σ(e) = 0.35,

variance = (1.80^2)×0.25^2 + 0.3^2= .

=3.24 × 0.0625 + 0.09

= 0.2925

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