Question: Based on a one-factor model, consider a portfolio of two securities with the following characteristics: a. If the standard deviation of the factor is 15%,

Based on a one-factor model, consider a of two securities with the following characteristics:

a. If the standard deviation of the factor is 15%, what is the factor risk of the portfolio?
b. What is the nonfactor risk of the portfolio?
c. What is the portfolio's standard deviation?

Factor Nonfactor Security Sensitivity Risk () Proportions .2 3.5 49 100

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