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The correlation coefficients between pairs of stocks arc as follows: Corr(A, B) = .8; Carr(AyC) = .60; Corr(A,D) = .4. Each stock has an expected

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The correlation coefficients between pairs of stocks arc as follows: Corr(A, B) = .8; Carr(AyC) = .60; Corr(A,D) = .4. Each stock has an expected return of 8% and a standard deviation of 15%. If your entire portfolio is now composed of stock A and you can add some of only one stock to your portfolio, would you choose (explain your choice): Would the answer to (a) change for more risk-averse investors? Explain. Suppose that in addition to investing in one more stock you can invest in T-bills as well. Would you change your answers to (a) and (b) if the T-bill rate is 8%

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