Question: Assume that a single APT factor describes risk and return, and that all stocks have a beta of 1 with respect to it. Assume also

Assume that a single APT factor describes risk and return, and that all stocks have a beta of 1 with respect to it. Assume also that all stocks have a firm-specific volatility of 19%. You find 41 stocks that have an alpha of +2% each that you invest $2MM into, which you finance by shorting another 41 stocks that you find have an alpha of -2% each. What is the dollar standard deviation of your portfolio? Please enter your answer in dollars rounded to the nearest cent.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Assume that a single APT factor describes risk and return, and that all stocks have a beta of 1 with respect to it. Assume also that all stocks have a firm-specific volatility of 21%. You find 40...

Question Completion Status: A Moving to another question will save this response. Question 4 Assume that a single APT factor describes risk and return, and that all stocks have a beta of 1 with...

Assume that a single APT factor describes risk and return, and that all stocks have a beta of 1 with respect to it. Assume also that all stocks have a firm-specific volatility of 19%. You find 41...

4) POINTS 20: Assume that a two-factor APT model describes the re- turns of well-diversified portfolios. You have concluded that the factor risk-premia for factors 1 and 2 are respectively -5% per...

Question 6 /10/ a) Company ABX stock has a return of 12%. The portion of the return that is not explained by a two-factor macroeconomic factor model is 5%. Use the data below to calculate company...

Suppose you want to create a portfolio of two stocks; Stock A in the banking industry and stock B in the engineering industry. Price and their respective dividend in the last few years are given...

2015 1. Suppose you want to create a portfolio of two stocks; Stock A in the banking industry and stock B in the engineering industry. Price and their respective dividend in the last few years are...

Hi again, I was hoping you can help with this investment management assignment. I am attaching the word document. It is 4 problems about asset management. Thank you for your help! Fin 6310 1. Assume...

Can someone help me with my assignment? I need it by Monday 2pm EDT. File is attached. Thanks! ***NOTES FROM PROFESSOR*** Dear Students, The iShares 13 Year Treasury Bond ETF (SHY)is a short term...

I need your help with this: Can you please quote from the attached chapters / resource if possible? Corporations often use different costs of capital for different operating divisions. Using an...

In January 2021, Hope Corporation has financed a new facility next to its current facility with a large long-term note payable. As a condition of obtaining the long-term loan, Hope Corporation agreed...

Write a paper in which must discuss about FedEx, how globalization and technology changes have impacted the corporation you researched. Apply the industrial organization model and the resource-based...

c 1 me 1 4 r . 1 7 . 0 2 5 t - benefit analysis is the public sector counterpart to used in private, profit - oriented firms. a . ratio analysis b . break - even analysis c . capital budgeting...

1 = "the response is poor" 2 = "the response is average" 3 = "the response is above average 4 = "the response is superior" Enter 1 2 Factors Below 0 . 0 0 \ table [ [ Advertising ] , [ Domestic...

What specific recommendations would you give Johnson? Are there any programs or initiatives that you would suggest?

What can PMT do to improve its safety practices and policies?

In preparing to negotiate an agreement with a union, what types of information would you gather before arriving at the bargaining table?