Jane's company uses the single index model to estimate beta for stocks A and B. The...
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Jane's company uses the single index model to estimate beta for stocks A and B. The risk-free rate over the period was 2%, and the market's average return was 10%. Performance is measured using an index model regression on excess returns.< 2 Index model regression estimates Residual standard deviation, de Standard deviation of market returns Stock A 1% +0.8( rm -rf)< 30% Stock B -2% + 1.2 (TM + rf)< < 40% 22% Compute the nonsystematic risk (variance) of a portfolio with 35% in stock A, < 35% in stock B and 30% in the risk-free asset.< E Jane's company uses the single index model to estimate beta for stocks A and B. The risk-free rate over the period was 2%, and the market's average return was 10%. Performance is measured using an index model regression on excess returns.< 2 Index model regression estimates Residual standard deviation, de Standard deviation of market returns Stock A 1% +0.8( rm -rf)< 30% Stock B -2% + 1.2 (TM + rf)< < 40% 22% Compute the nonsystematic risk (variance) of a portfolio with 35% in stock A, < 35% in stock B and 30% in the risk-free asset.< E
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