- MeasuringRisk
Answer the following problem (set number 13) from the end of Chapter 9.The following table shows estimates of the risk of two well-known Canadian
Stocks:
|
Standard Deviation, |
R2 |
Beta |
Standard Error |
|
|
Toronto |
25 |
.66 |
1.26 |
.09 |
|
Research |
44 |
.08 |
.82 |
.25 |
- What
proportion of each stock’s risk was market risk, and what proportion was
specific risk? - What
is the variance of Toronto Dominion? What is the specific variance? - What
is the confidence interval on Research in Motion’s beta? - 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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