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Q.3. The following table gives data on four stocks: Stock Alpha A 1.1 B 1.3 C 2.3 D 0.5 Systematic Variance 21.5 16 25 13 Unsystematic Variance 40 50 30 45 The market is expected to have a 14% return with a return variance of 16%². Using Sharpe's Single Index Model, calculate the expected return and risk for a portfolio assuming equal proportion of each of the stock.

Q.3. The following table gives data on four stocks: Stock Alpha A 1.1 B 1.3 C 2.3 D 0.5 Systematic Variance 21.5 16 25 13 Unsystematic Variance 40 50 30 45 The market is expected to have a 14% return with a return variance of 16%². Using Sharpe's Single Index Model, calculate the expected return and risk for a portfolio assuming equal proportion of each of the stock.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 12P
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Q.3. The following table gives data on four stocks: Systematic Stock Alpha Variance Unsystematic Variance А 1.1 21.5 40 1.3 16 50 2.3 25 30 0.5 13 45 The market is expected to have a 14% return with a return variance of 16%. Using Sharpe's Single Index Model, calculate the expected return and risk for a portfolio assuming equal proportion of each of the stock. ABCA
Transcribed Image Text:Q.3. The following table gives data on four stocks: Systematic Stock Alpha Variance Unsystematic Variance А 1.1 21.5 40 1.3 16 50 2.3 25 30 0.5 13 45 The market is expected to have a 14% return with a return variance of 16%. Using Sharpe's Single Index Model, calculate the expected return and risk for a portfolio assuming equal proportion of each of the stock. ABCA
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