Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.8% + 1.00RM + eA RB = –1.0% + 1.30RM + eB σM = 18%; R-squareA = 0.27; R-squareB = 0.13 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio P is composed of 70% Stock A and 30% Stock B.
What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
What is the "firm-specific" risk of portfolio Q?(Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.)