The Index Model Has Been Estimated for Stocks a and B

question 85

Multiple Choice

The index model has been estimated for stocks A and B with the following results: R_A = 0.01 + 0.6R_M + e_A.
R_B = 0.02 + 1.2R_M + e_B.
Σ_M = 0.30; σ(e_A) = 0.20; σ(e_B) = 0.10.
The standard deviation for stock A is

• A) 0.0656.
• B) 0.0676.
• C) 0.3499.
• D) 0.2600.

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Definitions:

Domestic Demand

The total demand for goods and services within a country, including both consumer and governmental purchases.

Calculators

Electronic devices or software used to perform calculations, ranging from simple arithmetic to complex mathematical operations.

World Trade Organization

An international body that deals with the rules of trade between nations, aiming to ensure that trade flows as smoothly, predictably, and freely as possible.

International Trade

The exchange of goods and services between countries, driven by comparative advantages.