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Business, 10.03.2020 22:32 Jasten

Security A has a beta of 0.9 and a standard deviation of its error term of 8%. If the standard deviation of the market is 10%, the total variance for Security A is (a) 17.2. (b) 73.0. (c) 145.0. (d) 154.0. (e) 181.0.

Security Y has a total variance of 225. Its beta is 1.2 and the market variance is 100. The standard deviation of its random error term is (a) 6%. (b) 14%. (c) 3%. (d) 9%. (e) 11%.

When using the market model for portfolio development, the analyst assumes that the correlation between each security's random error is (a) 0.5. (b) 0.0. (c) -0.5. (d) -1.0. (e) 1.0.

Please provide detailed work as I want to understand this.

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