Question: Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 2.00% + 0.40

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

RA= 2.00% + 0.40RM+eA

RB= -1.80% + 0.90RM+eB

M= 15%;R-squareA= 0.30;R-squareB= 0.22

Assume you create portfolioPwith investment proportions of 0.70 inAand 0.30 inB.

a.What is the standard deviation of the portfolio?(Do not round your intermediate calculations.Round your answer to 2 decimal places.)

b.What is the beta of your portfolio?(Do not round your intermediate calculations.Round your answer to 2 decimal places.)

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