# Residual Risk and Variance

I've solved part a, but am struggling with b and c. $$x_m$$ is the market portfolio vector, and I think $$T$$ should be a diagonal matrix. Any hints greatly appreciated!

• Yes, T is a diagonal matrix with $Var(\epsilon_i)$ in (i,i) and zeroes outside the main diagonal. – Alex C Apr 11 '19 at 19:19