Ask Question
11 September, 18:33

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.)

+2
Answers (1)
  1. 11 September, 18:49
    0
    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
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “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. ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers