Order Grade A+ Academic Papers Instantly!

Assume that Security returns

7.

value:

10.00 points

 

 

Assume that security returns are generated by the single-index model,
       Ri = ÃŽÂ±i + ÃŽÂ²iRM + ei

where Ri is the excess return for security i and RM is the market’s excess return. The risk-free rate is 2%. Suppose also that there are three securities AB, and C, characterized by the following data:

Security βi E(Ri) σ(ei)
A 1.2 12% 25%
B 1.3 13    11  
C 1.4 14    20  

a. If ÃÆ’M = 23%, calculate the variance of returns of securities AB, and C(Do not round intermediate calculations. Round your answers to the nearest whole number.)
  Variance
  Security A [removed]  
  Security B [removed]  
  Security C [removed]  

b.

Now assume that there are an infinite number of assets with return characteristics identical to those ofAB, and C, respectively. What will be the mean and variance of excess returns for securities AB, andC? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number. Omit the “%” sign in your response.)

  Mean Variance
  Security A [removed] %  [removed]  
  Security B [removed]      [removed]  
  Security C [removed]      [removed]  

references


ebook & resources

Solution:

15% off for this assignment.

Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!

Why US?

100% Confidentiality

Information about customers is confidential and never disclosed to third parties.

Timely Delivery

No missed deadlines – 97% of assignments are completed in time.

Original Writing

We complete all papers from scratch. You can get a plagiarism report.

Money Back

If you are convinced that our writer has not followed your requirements, feel free to ask for a refund.