(a.) You have 5 years of annual returns and you have estimated the following single index...

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(a.) You have 5 years of annual returns and you have estimated the following single index model The data you have used was as follows Years Ri(t) = 1.68 +0.61 Rm(t) + Ei(t) 1 2 3 4 5 Return on asset-i: 6.09 12.14 21.85 -8.32 8.37 Return on the Stock market index: 13.62 7.54 16.71 10.71 3.8 You have also obtained the following residuals: -3.84, 5.89, 10.05, -16.49 and 4.39. Calculate the total amount of risk for this stock as well as the market risk and firm specific risk. [35 marks] (a.) You have 5 years of annual returns and you have estimated the following single index model The data you have used was as follows Years Ri(t) = 1.68 +0.61 Rm(t) + Ei(t) 1 2 3 4 5 Return on asset-i: 6.09 12.14 21.85 -8.32 8.37 Return on the Stock market index: 13.62 7.54 16.71 10.71 3.8 You have also obtained the following residuals: -3.84, 5.89, 10.05, -16.49 and 4.39. Calculate the total amount of risk for this stock as well as the market risk and firm specific risk. [35 marks]

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To calculate the total amount of risk for the stock market risk and firmspecific risk we need to use ... View the full answer