Question

The following table shows estimates of the risk of two well-known Canadian stocks and their co efficient of determination R 1。the market Standard Deviation Standard Beta Error of Beta Toronto Dominion Bank Loblaw 18 28 54 01 16 26 25 a. What proportion of each stock's risk was market risk, and what proportion was specific risk? (Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest whole number.) Market risk Specific risk b. What is the variance of Toronto Dominion? What is the specific variance? (Use percents, not decimals, in your calculations. Do not round intermediate calculations. Round your answers to 2 decimal places.) Toronto Dominion Bank Specific variance c. What is the confidence interval on Loblaw's beta? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Enter the lowest value answer first and the highest value answer second in order to receive credit for correct answers. Confidence interval d. If the CAPM is oorrect, what is the expected return on Toronto Dominion? Assume a risk-free interest rate of 6% and an expected market return of 12% (Do not round %to intermediate calculations. Enter your answer as a percent rounded to 2 decimal places Expected return

Answer 1

Toronto Dominion Bank Loblaw 2 Market risk 46%)-1-54% 99%-1.1% 54% Specific risk 1%) 4 Toronto Dominion Bank 6 Variance 7 Specific variance 324 18 2 149.04-324*(1-54% 9 c Confidence interval 2496 to 75% 26%+2*25% 2696-2*25% 12 d Expected return 11.28%)-696+0.88*(12%-6% 14 e Expected return 0.72%)-696+0.88*(096-696