Solved: What is the factor risk of the portfolio, Other Management

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What is the factor risk of the portfolio

Problem: On the basis of a one factor model, consider a portfolio of two securities with the following characteristics :

Security Factor Sensitivity Nonfactor risk proportion

A .20 49 .40
B 3.50 100 .60

1) If the standard deviation of the factor is 15% , what is the factor risk of the portfolio ?

2) What is the nonfactor risk of the portfolio ?

3) What is the portfolio's standand deviation ?

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