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Y_Kistochka [10]
4 years ago
13

Suppose the market follows a single index model, where the index has standard deviation of 15%. For a stock with firm-specific r

isk (in terms of STD) of 10% and standard deviation of 30%, what is the beta of the stock
Business
1 answer:
iogann1982 [59]4 years ago
3 0

Answer:

Explanation:

St deviation of stock σ = √( β² x σ₁² + σ₂² )

σ₁ = standard deviation of market = .15 and σ₂ is standard deviation of firm

Putting the values given

.30 = √ ( β² x .15² + .10² )

.09 =  β² x .0225 + .01

β² x .0225 = .08

β² = 3.5555

β = 1.88

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