Question: Consider the two (excess return) index model regression results for A and B: RA = 1.1% + 1.7RM R-square = 0.682 Residual standard deviation =

Consider the two (excess return) index model regression results for A and B:

RA = 1.1% + 1.7RM

R-square = 0.682

Residual standard deviation = 14% RB = 0.4% + 1.4RM

R-square = 0.576

Residual standard deviation = 12.5%

a. Which stock has more firm-specific risk?

b. Stock A Stock B b. Which stock has greater market risk? Stock A Stock B

c. For which stock does market movement has a greater fraction of return variability?

d. Stock A Stock B d. If rf were constant at 8% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

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