Question: You estimate an index model for Stock A using the S&P 500 index as your index. The standard deviation of the index is 20%. Your

You estimate an index model for Stock A using the S&P 500 index as your index. The standard deviation of the index is 20%. Your estimation yields a beta of 1.5 and a residual standard deviation of 30%

A) What is the total variance?

B) What is the total variance if beta increases by 0.15?

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