The variance of returns for a risky asset is 25%.The variance of the error term,Var(e),is 8%.What portion of the total risk of the asset,as measured by variance,is systematic?
A) 32%
B) 8%
C) 68%
D) 25%
E) 75%

Name: The variance of returns for a risky asset is 25%.The variance of the error term,Var(e),is 8%.What portion of the total risk of the asset,as measured by variance,is systematic? A) 32% B) 8% C) 68% D) 25% E) 75%
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Question

Quizplus · Accepted Answer

8%/25% = 0.32.1 - 0.32 = 68% systematic.

The Variance of Returns for a Risky Asset Is 25