Question: A portfolio is equally split between 10 different stocks, each of which has a beta of 1 and the same correlation with the market portfolio.

A portfolio is equally split between 10 different stocks, each of which has a beta of 1 and the same correlation with the market portfolio. The idiosyncratic component of returns is uncorrelated across stocks. The annualized volatility of the market is 15%, and of the portfolio is 17%.

(a) What is the volatility of each stock?

(b) What is the correlation between each stock and the market?

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