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    One Factor Model Standard deviation of securities

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    Need help with a portfolio problem

    On the basis of a one factor model, for two securities A and B:

    RAt=5% + .8Ft + eAt

    RBt=7% + 1.2Ft + eBt




    Calculate the standard deviation of each security .

    © BrainMass Inc. brainmass.com December 24, 2021, 4:47 pm ad1c9bdddf


    Solution Preview

    See attached file for proper formatting.

    b11= 0.8 =Sensitivity of Security A to the Factor 1 (RAt=5% + .8Ft + eAt)
    b21= 1.2 =Sensitivity of Security B to the Factor 1 (RBt=7% + ...

    Solution Summary

    The solution calculates the standard deviation of securities using one factor model.