Use the following information for the next 3 questions. Suppose a simple model of the stock market. There are 2 risky assets: A and B. More precisely, let's assume that the percentage return on the asset i, which we denote by Ri, can be described as follows: Ri=r + biF + 6iXi where r is a constant, F is a random variable with E(F) = 0 and Var(F) = 4. Xa and XB are random variables that are independent of F and Var(XA) = Var(XB) = Cov(X4, XB) = 1. Finally, let's define Rp as the return on the equally-weighted portfolio. ba + bB = 3 04+ B = 4 ba - bB = -1 GA- OB= 2 Question 7.39. What is Var(Rp)? Question 7.40. If we want to put more weight (= 2/3) on a stock with higher bi, what is Var(R.), where p* is a new portfolio? Question 7.41. Suppose that we want to put more weight (= 2/3) on a stock with higher oi and let p** be a new portfolio. Explain degrees of diversification among p, p*, and p**. ** Use the following information for the next 3 questions. Suppose a simple model of the stock market. There are 2 risky assets: A and B. More precisely, let's assume that the percentage return on the asset i, which we denote by Ri, can be described as follows: Ri=r + biF + 6iXi where r is a constant, F is a random variable with E(F) = 0 and Var(F) = 4. Xa and XB are random variables that are independent of F and Var(XA) = Var(XB) = Cov(X4, XB) = 1. Finally, let's define Rp as the return on the equally-weighted portfolio. ba + bB = 3 04+ B = 4 ba - bB = -1 GA- OB= 2 Question 7.39. What is Var(Rp)? Question 7.40. If we want to put more weight (= 2/3) on a stock with higher bi, what is Var(R.), where p* is a new portfolio? Question 7.41. Suppose that we want to put more weight (= 2/3) on a stock with higher oi and let p** be a new portfolio. Explain degrees of diversification among p, p*, and p**. **