Q 8.27. Consider the following assets:

1. Compute the market betas for assets X and Y. 2. Compute the correlations of X and Y with M. 3. Assume you were holding only M. You now are selling off 10% of your M portfolio to replace it with 10% of either X or Y. Would an M&X portfolio or an M&Y portfolio be riskier? 4. Is the correlation indicative of which of these two portfolios ended up riskier? Is the market beta indicative? Q

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Bad Okay Good Market M Asset X -5% 5% 15% -2% -3% 25% Asset Y -4% -6% 30%