# Finance question

posted by
**jerick** on
.

Suppose CAPM is true. You are considering investing in an equally weighted

portfolio of two stocks, A and B. The betas of these stocks to the market factor are

1.10 and 0.80, respectively. The total return volatilities of stocks A and B are

σA=0.20 and σB=0.18, and the standard deviation of the factor’s return is 0.15.

1.b. What is the portfolio’s systematic risk (stated as a variance)?

1.c. What is your portfolio’s total risk (stated as a variance), assuming the

idiosyncratic risks of the stocks A and B are uncorrelated?

Answer:

1a) 0.95

1b) systematic risk 0.0203

1c) total risk 0.0181

Can anyone help to double confirm the answers? plus question part c seems to be wrong but I don't know why.