The standard deviation of the market-index portfolio is 20%. Stock A has a beta of 2.50 and a residual standard deviation of 30%. a. Calculate the total variance for an increase of 0.25 in its beta. (Do not round intermediate calculations. Round your answer to the nearest whole number.) b. Calculate the total variance for an increase of 7.75% in its residual standard deviation.

Answer and Explanation:

Given:

Market-index portfolio (σ) = 20% = 0.20

β = 2.50

Residual standard deviation (e) = 30% = 0.30

A. Total variance for an increase of 0.25 beta = ?

B. Total variance for an increase of 7.75% (0.0775) in its residual standard deviation = ?

Computation:

A. Total variance = Systematic Variance + Residual Variance

Total variance = β²σ² + e²

Total variance = (2.50 + 0.25)²(0.20)² + (0.30)²

Total variance = (2.75)²(0.20)² + (0.30)²

Total variance = (7.5625)(0.04) + 0.09

Total variance = (0.3025) + 0.09

Total variance = 0.3925

B. Total variance = Systematic Variance + Residual Variance

Total variance = β²σ² + e²

Total variance = (2.50)²(0.20)² + (0.30 + 0.0775)²

Total variance = (2.50)²(0.20)² + (0.3775)²

Total variance = (6.25)(0.04) + 0.14250625

Total variance = (0.25) + 0.14250625

Total variance = 0.3925

hi : ) i found this so i hope this !

"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"

answer///supply is elastic, and demand is inelastic;