1. Suppose that we estimate single index models for two assets A and B and obtain...
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1. Suppose that we estimate single index models for two assets A and B and obtain the following results: RA = 0.02 +0.65RM + eA RB = 0.04 + 1.10RM + eB In addition, we observe that OM = 25.0%, OA = 42.0%, and oB = 50.2%. a. Estimate the systematic and unsystematic variances of each of these assets. b. Estimate the alpha and beta of a portfolio consisting of 60% in asset A and 40% in asset B. c. Estimate the total, systematic and unsystematic variances of a portfolio consisting of 60% in asset A and 40% in asset B. (6 marks) 1. Suppose that we estimate single index models for two assets A and B and obtain the following results: RA = 0.02 +0.65RM + eA RB = 0.04 + 1.10RM + eB In addition, we observe that OM = 25.0%, OA = 42.0%, and oB = 50.2%. a. Estimate the systematic and unsystematic variances of each of these assets. b. Estimate the alpha and beta of a portfolio consisting of 60% in asset A and 40% in asset B. c. Estimate the total, systematic and unsystematic variances of a portfolio consisting of 60% in asset A and 40% in asset B. (6 marks)
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Understanding Basic Statistics
ISBN: 9781111827021
6th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase
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