The following data are for Problems $7,7.$A$.$ and $7.$B$.$: The correlation coefficients between pairs of stocks

are as follows: Corr$(A,B)=\mathrm{.}85$;Corr$(A,C)=\mathrm{.}60$;Corr$(A,D)=\mathrm{.}45.$ Each stock has an expected return of $8\%$

and a standard deviation of $20\%.$

$7-$ 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$)$: $(1$ Point$)$

$B.$

$D.$

$C.$

Need more data.

A$.$ Would the answer to Problem $7$ change for more risk$-$averse or risk$-$tolerant investors? Explain.

B$.$ Suppose that in addition to investing in one more stock you can invest in T$-$bills as well. Would you

change your answers to Problems $7$ and $7.$A$.$ if the T$-$bill rate is $8\%?$