Question: Need answer for part C. Please workout using equation, not excel. Thanks! Suppose that the index model for stocks A and B is estimated from

Need answer for part C. Please workout using equation, not excel. Thanks!

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA - 1.5% + 0.55 RM + eA RB = -1.4% + 0.60RM + eB OM = 18%; R-square A = 0.25; R-squares = 0.16 Assume you create a portfolio Q, with investment proportions of 0.50 in a risky portfolio P, 0.30 in the market index, and 0.20 in T-bill. Portfolio P is composed of 60% Stock A and 40% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation 12.72 % b. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta 0.59 c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.) Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA - 1.5% + 0.55 RM + eA RB = -1.4% + 0.60RM + eB OM = 18%; R-square A = 0.25; R-squares = 0.16 Assume you create a portfolio Q, with investment proportions of 0.50 in a risky portfolio P, 0.30 in the market index, and 0.20 in T-bill. Portfolio P is composed of 60% Stock A and 40% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation 12.72 % b. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta 0.59 c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.)

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