Question: Need only Math and formula part with explanations. solve maths part using formulas. Based on a single factor, model, you have performed the following regressions

Need only Math and formula part with explanations. solve maths part using formulas.

Need only Math and formula part with explanations. solve maths part using

Based on a single factor, model, you have performed the following regressions on the returns to stocks X and Y against the returns on a market index (MI) which you believe is a good proxy for all relevant risk factors: r_j = a_j + beta_j r_MI + epsilon_j The results you are given are as follows In addition, you estimate the variance of the market index as. Sigma^2 (r_MI) = 0.09 What will be the unique risk (sigma^2 (epsilon_p)) of a portfolio composed of equal amounts of stock X and stock Y

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