Question: Please, use equation for computation. (NOT Excel tables) 1. A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio , to

Please, use equation for computation. (NOT Excel tables)

1. A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio , to form a 4-stock portfolio. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. Potential new Stocks a and B both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r = 0.75. However, stocks A's standard deviation of returns is 12% versus 8% for Stock B. Which stock should this investor add to his or her portfolio, or does the choice not matter?

2. Kristina Rattama holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.875.

Stocks	Investment	Beta
A	$50,000	0.50
B	$50,000	0.80
C	$50,000	1.00
D	$50,000	1.20
Total	$200,000

If Kristina replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio's new beta be?

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