Explore BrainMass

Explore BrainMass

    One Factor Model Standard deviation of securities

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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

    @f=18%

    @eA=25%

    @eB=15%

    Calculate the standard deviation of each security .

    © BrainMass Inc. brainmass.com March 4, 2021, 5:42 pm ad1c9bdddf
    https://brainmass.com/business/valuing-securities/standard-deviation-securities-factor-model-7131

    Attachments

    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.

    $2.49

    ADVERTISEMENT