The standard deviation of the market-index portfolio is 25%. Stock A has a beta of 1.60 and a residual standard deviation of 35%. Required: a. Calculate the total variance for an increase of 0.20 in its beta.

The standard deviation of the market-index portfolio is 25%. Stock A has a beta of 1.60 and a residual standard deviation of 35%. Required: a. Calculate the total variance for an increase of 0.20 in its beta.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 1P: The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market...

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Question

The standard deviation of the market-index portfolio is 25%. Stock A has a beta of 1.60 and a residual standard deviation of 35%.

Required:

a. Calculate the total variance for an increase of 0.20 in its beta.

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