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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:
RA = 0.01 + 0.8RM + eA
RB = 0.02 + 1.2RM + eB
ΣM = 0.20 σ(eA) = 0.20 σ(eB) = 0.10
The standard deviation for stock A is __________.


Definitions:

Per Month

A term indicating a frequency or rate that applies to each month.

Each Quarter

A period of three months used in financial and business reporting.

Per Month

A term indicating the occurrence or measurement of something on a monthly basis.

Compounded Quarterly

Interest on an investment or loan calculated four times a year, adding each interest payment to the principal for future calculations.

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