1. Suppose that the average stock has a volatility of 58 % and that the correlation between pairs of stocks is 18%. Estimate the volatility of an equally weighted portfolio with:

Make sure to round to 2 decimal places

a.1 stock

b. 30 stocks

c. 1,000 stocks

2. You currently hold a portfolio of three stocks, Delta, Gamma, and Omega. Delta has volatility of

52 % Gamma has a volatility of 20%,and Omega has a volatility of 33 % Suppose you invest 40%

of your money in Delta, and 30% each in Gamma and Omega.

a. What is the highest possible volatility of your portfolio?

b. If your portfolio has the volatility in

(a), what can you conclude about the correlation between Delta and Omega?