Question: Assume that security returns are generated by the single-index model where R, is the excess return for security , and Ry is the market's excess

Assume that security returns are generated by the single-index model where

Assume that security returns are generated by the single-index model where R, is the excess return for security , and Ry is the market's excess return. The risk-free rate is 3% Suppose also that there are three securities A, B, and C, characterized by the following data: E(R) 13% o(e) 26% Security 0.5 0.9 21 21 a. If ?M-25%, calculate the variance of returns of securities A, B, and C. (Do not round intermediate calculations. Round your answers to the nearest whole number.) Variance SecurityA SecurityB Security C b. Now assume that there are an infinite number of assets with return characteristics identical to those of A B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number. Omit the "%" sign in your response.) Mean Variance SecurityA SecurityB Security C

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