The Index Model Has Been Estimated for Stock a with the Following

question 41

Multiple Choice

The index model has been estimated for stock A with the following results: R_A = 0.01 + 1.2R_M + e_A.
Σ_M = 0.15; σ(e_A) = 0.10.
The standard deviation of the return for stock A is

• A) 0.0356.
• B) 0.1887.
• C) 0.1600.
• D) 0.6400.

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Definitions:

Reality Checks

Methods or situations that force an individual or group to consider the actual circumstances surrounding them, often dispelling illusions.

Semiprogrammed Decisions

Decisions that are made with a mix of established procedures and the judgment of the decision-maker, often used when faced with partially known circumstances.

Contingent Decisions

Contingent decisions are decisions made based on certain conditions or situations arising, meaning they are dependent on particular events or circumstances.

Nonprogrammed Decisions

Decisions that are unique, require custom solutions, and are typically made in response to situations that are novel, unstructured, and not anticipated.