You choose to construct a portfolio from the Stock A, Stock B, and the risk-free investment. You make the following estimates of the three: Estimates of Alpha, Beta, and Firm-Specific Risk   Alpha Beta Firm-Specific Std Dev Stock A 1.50% 1.40 80.00% Stock B 1.75% 1.80 90.00% Risk-Free Investment 0.00% 0.00 0.00% You invest 30% of your portfolio in Stock A, 30% in Stock B, and the remaining 40% in the risk-free investment. What is your portfolio’s firm-specific risk (standard deviation)?  

You choose to construct a portfolio from the Stock A, Stock B, and the risk-free investment. You make the following estimates of the three: Estimates of Alpha, Beta, and Firm-Specific Risk   Alpha Beta Firm-Specific Std Dev Stock A 1.50% 1.20 70.00% Stock B 0.75% 1.50 65.00% Risk-Free Investment 0.00% 0.00 0.00% You invest 30% of your portfolio in Stock A, 30% in Stock B, and the remaining 40% in the risk-free investment. What is your portfolio’s alpha?  

You choose to construct a portfolio from the Stock A, Stock B, and the risk-free investment. You make the following estimates of the three: Estimates of Alpha, Beta, and Firm-Specific Risk   Alpha Beta Firm-Specific Std Dev Stock A 1.00% 0.70 50.00% Stock B 0.25% 1.50 30.00% Risk-Free Investment 0.00% 0.00 0.00% You invest 70% of your portfolio in Stock A, 20% in Stock B, and the remaining 10% in the risk-free investment. What is your portfolio’s alpha?  

Suppose the simple CAPM is correct and investors have quadratic utility. What is the market risk premium if the risk-aversion index of the average investor is 2.5 and the market portfolio risk (standard deviation) is 20%?

Challenge Use the CAPM and the following assumptions to estimate the expected return of the given stock for the next year. The risk-free rate is [rF0]% All investors have quadratic utility with the average investor’s risk aversion index of [Abar] The standard deviation of the market portfolio is [SDM0]% The predicted beta is found with the following prediction model:

Consider the following monthly returns for a stock, the market portfolio, and the risk-free investment over the last 12 months: Monthly Returns of a Stock, the Market Portfolio, and the Risk-Free Investment Month Stock Market Risk-Free 1 [RS10]% [RM10]% [RF10]% 2 [RS20]% [RM20]% [RF20]% 3 [RS30]% [RM30]% [RF30]% 4 [RS40]% [RM40]% [RF40]% 5 [RS50]% [RM50]% [RF50]% 6 [RS60]% [RM60]% [RF60]% 7 [RS70]% [RM70]% [RF70]% 8 [RS80]% [RM80]% [RF80]% 9 [RS90]% [RM90]% [RF90]% 10 [RS100]% [RM100]% [RF100]% 11 [RS110]% [RM110]% [RF110]% 12 [RS120]% [RM120]% [RF120]%   Assuming the single-factor model is true, what was the annualized firm-specific risk over the last twelve months for the stock? Enter your annualized firm-specific risk as a percentage, rounded to the nearest 0.01% (e.g., for 0.12345, enter 12.35).

What is the dominant strategy for the Player 2?

The indifference curves above show us that Alya’s indifferent between having (15 slices of pizza, 5 cans of coke) and

Suppose that the price of a can of coke increases from $2 to $4, income is $40 and price of a slice of pizza is $2. Alya’s budget constraint is given in the graph above and you will need to identify the correct one. The new optimal consumption bundle is given by ___,

The long-run price PLR is