The Index Model Has Been Estimated for Stocks a and B

question 68

Multiple Choice

The index model has been estimated for stocks A and B with the following results:
R_A = 0.01 + 0.8R_M + e_A
R_B = 0.02 + 1.2R_M + e_B
Σ_M = 0.20 σ(e_A) = 0.20 σ(e_B) = 0.10
The standard deviation for stock A is __________.

• A) 0.0656
• B) 0.0676
• C) 0.2561
• D) 0.2600
• E) none of these

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Definitions:

Emotions

Complex psychological states that involve an individual's subjective experience, physiological response, and behavioral or expressive reaction.

Reflexes

Involuntary and automatic responses of the body to certain external stimuli, indicative of the nervous system's health and functioning.

Temperament

The aspect of an individual’s personality concerning inherent emotional and behavioral patterns.