Consider the following assets: Bad Okay Good

Market M -5% 5% 15%

Asset X -2% -3% 25%

Asset Y -4% -6% 30%

Assume each scenario is equally likely Do the following: a.) Compute the market betas for assets X and Y. b.) Compute the correlations for X and Y with M. c.) Assume you were holding only M. You now are selling 10% of your M portfolio to replace it with 10% of either X or Y. Would an M & X portfolio or M & Y portfolio be riskier?