Question: Consider the two (excess return) index model regression results for A and B: RA = 2% + 1.8RM R-square = 0.628 Residual standard deviation =

Consider the two (excess return) index model regression results for A and B: RA = 2% + 1.8RM R-square = 0.628 Residual standard deviation = 12.2% RB = 1.2% + 1.2RM R-square = 0.586 Residual standard deviation = 10.5%

a. Which stock has more firm-specific risk? Stock A or Stock B

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

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

d. If rf were constant at 5.6% 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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