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

question 25

Multiple Choice

The index model for stock A has been estimated with the following result:
R_A= 0.01 + 0.9R_M+ e_A
If σ_M= 0.25 and R²_A= 0.25,the standard deviation of return of stock A is _________.

• A)0.2025
• B)0.2500
• C)0.4500
• D)0.8100
• E)none of the above

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Definitions:

Economics in Practice

The application of economic theories and principles to real-world scenarios and the analysis of actual economic practices.

Variable Input

In economics, any resource or factor of production whose quantity can be changed in the short term to influence output.

Society Values

The principles, standards, or ideals shared by members of a society regarding what is desirable or important.

Marginal Revenue Product

Incremental income produced from the application of one additional unit of resources such as labor or capital.