The single index model has been estimated for a particular security is estimated for a particular security with the following results:
Ra = .01 + .50Rm + Ea
Rb = .02 + 1.30Rm + Eb
The standard deviation of the market return was .25
| Variable |
R2 |
A?A? |
| Ra |
X |
0.217 |
| Rb |
0.36 |
X |
a. What is the R2 for firm A?
b. What is the A?A? for firm B?What is the R2 for firm A?
c. A portfolio which is 60% security A and 40% security B would have a beta of . . . ?
d. Provide an estimate of A?‚® for security A assuming that the average monthly market return was .015 (decimal), and the average T-Bill rate was .005. What is the R2 for firm A?