Question: The following are estimates for two stocks. The market index has a standard deviations of 22% and the risk-free rate is 8%. a. What are

The following are estimates for two stocks.

The market index has a standard deviations of 22% and the risk-free rate is 8%.
a. What are the standard deviations of stocks A and B?
b. Suppose that we were to construct a portfolio with proportions:
Stock A: ......30
Stock B: ......45
T-bills: ........25
Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of theportfolio.

Stock Expected Return Beta Firm-Specific Standard Deviation 13% 18 0.8 1.2 30% 40

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a The standard deviation of each individual stock is given by Since A 08 B 12 e A 30 e B 40 and M 22 ... View full answer

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