Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA 1.00% + 0.45RM + eA RB = -1.00% + 1.00RM + eB OM 16%; R-squarea = 0.28; R-squareB = 0.21...

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Extracted text: Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA 1.00% + 0.45RM + eA RB = -1.00% + 1.00RM + eB OM 16%; R-squarea = 0.28; R-squareB = 0.21 Assume you create portfolio P with investment proportions of 0.60 in A and 0.40 in B. a. What is the standard deviation of the portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Standard deviation % b. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta .....


Extracted text: c. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.) Firm-specific d. What is the covariance between the portfolio and the market index? (Do not round your intermediate calculations. Round your answer to 3 decimal places.) Covariance 0.020