Question: c. A portfolio is equally split between 10 different stocks, each of which has a beta of 1.5 and the same correlation with the market

c. A portfolio is equally split between 10 different stocks, each

c. A portfolio is equally split between 10 different stocks, each of which has a beta of 1.5 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's volatility is 24%. Required: i. What is the volatility of each stock? [10 marks] ii. What is the correlation between each stock and the market? [3 marks] iii. What is the correlation between one stock and another? [2 marks] c. A portfolio is equally split between 10 different stocks, each of which has a beta of 1.5 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's volatility is 24%. Required: i. What is the volatility of each stock? [10 marks] ii. What is the correlation between each stock and the market? [3 marks] iii. What is the correlation between one stock and another? [2 marks]

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