Problem 10-8 (Algo) Assume that security returns are generated by the single-index model, Ri = ai...

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Problem 10-8 (Algo) Assume that security returns are generated by the single-index model, Ri = ai + BiRm + ei where R is the excess return for security / and RM is the market's excess return. The risk-free rate is 3%. Suppose also that there are three securities A, B, and C, characterized by the following data: ABL Security Bi 1.2 E(Ri) 11% o(ei) 20% 1.3 12 11 1.4 13 14 Required: a. If om 16%, calculate the variance of returns of securities A, B, and C. = b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B If = 16%, calculate the variance of returns of securities A, B, and C. Note: Do not round intermediate calculations. Round your answers to the nearest whole number. Variance Security A Security B Security C Problem 10-8 (Algo) Assume that security returns are generated by the single-index model, Ri = ai + BiRm + ei where R is the excess return for security / and RM is the market's excess return. The risk-free rate is 3%. Suppose also that there are three securities A, B, and C, characterized by the following data: ABL Security Bi 1.2 E(Ri) 11% o(ei) 20% 1.3 12 11 1.4 13 14 Required: a. If om 16%, calculate the variance of returns of securities A, B, and C. = b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B If = 16%, calculate the variance of returns of securities A, B, and C. Note: Do not round intermediate calculations. Round your answers to the nearest whole number. Variance Security A Security B Security C