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? multiple choice 1 Stock A Stock B b. Which stock has greater market risk? multiple choice 2 Stock A Stock B c. For which stock does market movement has a greater fraction of return variability? multiple choice 3 Stock A 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

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