26. An investor is constructing a portfolio out of 5 stocks. Each stock has the same expected return and the same variance. (a) Assume that the correlation between the returns of each pair of stocks is .20. How will the variance of a portfolio consisting of 1/5 of each of the 5 stocks compare with the variance of one of the individual stocks? (b) How will the Sharpe Ratio for a portfolio consisting of 1/5 of each of the 5 stocks described in (a) compare with the Sharpe Ratio for a portlolio that is 100 percent invested in one of the stocks? (c) Consider the following two portfolios, each composed of stocks which all have the same expected return and variance. One portfolio has 25 percent invested in each of 4 stocks, each of which has a return that is uncorrelated with all the others. The other has 5 stocks, each of which has 20 percent invested in each security. However, the returns of the second group of stocks each have a correlation of (rho) for each pair of stocks (the same for every pair). For what value of will the two portfolios have the same Sharpe Ratio? 26. An investor is constructing a portfolio out of 5 stocks. Each stock has the same expected return and the same variance. (a) Assume that the correlation between the returns of each pair of stocks is .20. How will the variance of a portfolio consisting of 1/5 of each of the 5 stocks compare with the variance of one of the individual stocks? (b) How will the Sharpe Ratio for a portfolio consisting of 1/5 of each of the 5 stocks described in (a) compare with the Sharpe Ratio for a portlolio that is 100 percent invested in one of the stocks? (c) Consider the following two portfolios, each composed of stocks which all have the same expected return and variance. One portfolio has 25 percent invested in each of 4 stocks, each of which has a return that is uncorrelated with all the others. The other has 5 stocks, each of which has 20 percent invested in each security. However, the returns of the second group of stocks each have a correlation of (rho) for each pair of stocks (the same for every pair). For what value of will the two portfolios have the same Sharpe Ratio