Suppose that the standard deviation of returns from a typical share is about 0.46 (or 46%) a year. The correlation between the returns of each pair of shares is about 0.4.

a.	Calculate the variance and standard deviation of the returns on a portfolio that has equal investments in 2 shares, 3 shares, and so on, up to 10 shares. (Do not round intermediate calculations. Enter "Variance"as a decimal rounded to 6 places and "Standard Deviation" to 3 places.)

No. of		Standard
Shares	Variance	Deviation (%)
1
2
3
4
5
6
7
8
9
10

b.	How large is the underlying market variance that cannot be diversified away? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 3 places.)

Market risk

c.

Assume that the correlation between each pair of stocks is zero. Calculate the variance and standard deviation of the returns on a portfolio that has equal investments in 2 shares, 3 shares, and so on, up to 10 shares. (Do not round intermediate calculations. Enter "Variance" as a decimal rounded to 6 places and "Standard Deviation" to 3 places.)

No. of		Standard
Shares	Variance	Deviation (%)
1
2
3
4
5
6
7
8
9
10