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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.0% + 0.45RM + eA RB = –1.0% + 1.00RM + eB σM = 16%; R-squareA = 0.28; R-squareB = 0.21 Assume you create a portfolio Q, with investment proportions of 0.50 in a risky portfolio P, 0.30 in the market index, and 0.20 in T-bill. Portfolio P is composed of 60% Stock A and 40% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. 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.) d. What is the covariance between the portfolio and the market index? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.)

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