Li

CFA Level III Economics
#1

Hi all,

I wonder how in the question number 3 they bring out this guy:

Var (ε) = 0.0770

O_O

Thanks and courage,

#2

It’s part of the variance formula, it’s the variance of the error term for a regression.

#3

Var(M) = Var(F1)*b1^2 + Var(F2)*b2^2 + 2*b1*b2*Cov(F1,F2) + Var(e)

0.2704 = 0.0784*1.02^2 + 0.1024*1.045^2 + 0 + Var(e)

==> Var(e) = 0.077