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Answer the following problem the following table shows


Measuring Risk

Answer the following problem:

The following table shows estimates of the risk of two well-known Canadian Stocks:

 

Standard Deviation, %

R2

Beta

Standard Error of Beta

Toronto Dominion Bank

 25

 .66

1.26

.09 

Research in Motion

44

.08

.82

.25
  1. What proportion of each stock's risk was market risk, and what proportion was specific risk?
  2. What is the variance of Toronto Dominion? What is the specific variance?
  3. What is the confidence interval on Research in Motion's beta?
  4. If the CAPM is correct, what is the expected return on Toronto Dominion? Assume a risk-free interest rate of 5% and an expected market return of 12%.

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Finance Basics: Answer the following problem the following table shows
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