Question: Stock Expected Return Beta Firm Specific Standard Deviation The market index has a standard deviation of 20% and the risk free rate is 7%. (a)

Stock Expected Return Beta Firm Specific Standard Deviation

The market index has a standard deviation of 20% and the risk free rate is 7%.
(a) What are the Standard deviations of stocks of Acme and Bundu?
(b) Suppose we were to construct a portfolio with proportions:
Stock Acme .......0.30Stock Bundu ......0.45T-bills ........ 0.25
Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of theportfolio.

Acme 14% 0.9 3000 Bundu 2100 1.4 42%

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