Stock Y has a Beta of 0.95 while the standard deviation of its residual is 0.24. The standard deviation of the Market portfolio is 0.19. What percent of the total variance of Stock Y comes from systematic risk? Group of answer choices 36.1% 59.0% 62.3% 44.4% None of the above
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Stock Y has a Beta of 0.95 while the standard deviation of its residual is 0.24. The standard deviation of the Market portfolio is 0.19. What percent of the total variance of Stock Y comes from systematic risk? Group of answer choices 36.1% 59.0% 62.3% 44.4% None of the above
Step by step
Solved in 3 steps
