The data below describe a portfolio that consists of three stocks and each stock satisfies a...

 

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The data below describe a portfolio that consists of three stocks and each stock satisfies a single-index model. Stock code Market Capitalisation ($M) ANQ 7,000 BRC 9,000 CZW 4,000 Beta Excess return (%) Standard Deviation (%) 1.0 0.2 127 207 40 30 50 1.7 Assume the standard deviation of the market excess returns is 25%. Required: a) What are the average excess return and the beta of the portfolio? b) What is the covariance between stock ANQ and stock BRC? c) What is the covariance between stock BRC and the market? (4 marks) (2 marks) (2 marks) d) Break down the variance of stock BRC into its systematic and firm-specific components. (4 marks) e) What is R-square for single index model of stock CZW and the correlation coefficient of returns between stock CZW and the market? (3 marks) (Carry at least 4 decimal places in your calculations) The data below describe a portfolio that consists of three stocks and each stock satisfies a single-index model. Stock code Market Capitalisation ($M) ANQ 7,000 BRC 9,000 CZW 4,000 Beta Excess return (%) Standard Deviation (%) 1.0 0.2 127 207 40 30 50 1.7 Assume the standard deviation of the market excess returns is 25%. Required: a) What are the average excess return and the beta of the portfolio? b) What is the covariance between stock ANQ and stock BRC? c) What is the covariance between stock BRC and the market? (4 marks) (2 marks) (2 marks) d) Break down the variance of stock BRC into its systematic and firm-specific components. (4 marks) e) What is R-square for single index model of stock CZW and the correlation coefficient of returns between stock CZW and the market? (3 marks) (Carry at least 4 decimal places in your calculations)

Answer rating: 100% (QA)

To solve these questions lets use the formulas for the singleindex model a Average excess return and beta of the portfolio Average excess return of th... View the full answer