The Index Model Has Been Estimated for Stocks a and B

question 77

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
Β_M= 0.20 β(e_A) = 0.20 β (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 the above

---

Definitions:

Confidence and Accuracy

The relationship between an individual's self-assurance in their abilities and the correctness of their outcomes.

Recollections

The action or faculty of remembering something.

Critical Thinking

is the intellectually disciplined process of actively and skillfully conceptualizing, applying, analyzing, synthesizing, and/or evaluating information gathered from, or generated by, observation, experience, reflection, reasoning, or communication.

Alternative Explanations

Different theories or reasons provided to account for certain observations or phenomena, offering multiple perspectives.