Suppose that the standard deviation of returns from a typical share is about $0\mathrm{.}42($or

$42\%)$ a year. The correlation between the returns of each pair of shares is about $0\mathrm{.}7.$

a$.$ Calculate the variance and standard deviation of the returns on a portfolio that has

equal investments in $2$ shares, $3$ shares, and so on$,$ up to $10$ shares. $($Use decimal

values, not percents, in your calculations. Do not round intermediate calculations.

Round the "Variance" answers to $6$ decimal places. Round the "Standard Deviation"

answers to $3$ decimal places.$)$

Answer is not complete.

b$.$ How large is the underlying market variance that cannot be diversified away? $($Do not

round intermediate calculations. Round your answer to $3$ decimal places.$)$

Answer is not complete.

Market risk