The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50 and a residual standard deviation of 40%.

a. Calculate the total variance for an increase of 0.10 in its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

b	Calculate the total variance for an increase of 3.35% in its residual standard deviation? (Do not round intermediate calculations. Round your answer to 4 decimal places.

c.

An investor who currently holds the market-index portfolio decides to reduce the portfolio allocation to the market index to 90% and to invest 10% in stock A. Which of the following changes will have a greater impact on the portfolio's standard deviation?

	Increase of .10 in beta.
	Increase of 3.35% in residual standard deviation.