Question 2 (Essential to cover) Consider risk measures on the following 3 large cap stocks: Stock Beta () Berkshire Hathaway (BRK) 0.69 Apple (APPL) 1.15 1.28 Standard Deviation () 23.50% 24.00% 22.80% Microsoft (MSFT) The standard deviation of the Market Portfolio M=15.3% a. Calculate the systematic and unsystematic risk of BRK, APPL and MSFT. b. What is BRK's covariance and correlation with the Market Portfolio's return? c. Calculate the following covariances: COV(BRK,APPL), COV(BRK,MSFT), COV(APPL.MSFT) d. Consider an equally weighted portfolio of BRK and APPL. Calculate the portfolio's total risk (i.e. variance), systematic risk and unsystematic risk? Verify that =122 N e. Consider an equally weighted portfolio of all three stocks. Calculate the portfolio's total risk (i.e. variance), systematic risk and unsystematic risk? Verify that = 10. What happens to unsystematic risk as the number of assets becomes very large?