4. Suppose investors create a 2 stock portfolio by investing $100,000 in CPC and $100,000 in Morely. a. Calculate the expected return for each state of the economy, and then compute the expected return for the portfolio. Complete the related blank in Table 2. b. Compute the standard deviation for the portfolio, and compare it to the standard deviation of the individual stocks. Complete the related blanks in Table 2. c. In general, how would risk be affected if you formed another portfolio composed of CPC and EAT? Explain how the correlation coefficient affects the level of diversification in the CPC-Morely and the CPC-EAT portfolios. d. Explain what would happen to the expected return and standard deviation as the portfolio mix changes. If you are using the spread-sheet model for the case, determine the expected return and stand-ard deviation for a series of CPC-Morely portfolios starting with 0% CPC and increasing the percentage by 10 points for each iteration. 5. Suppose an investor has a portfolio consisting of just one randomly-selected stock. What happens to the risk as the investor adds more and more randomly-selected stocks to the portfolio? Illustrate your answer with a graph showing portfolio standard deviation on the vertical axis and number of stocks on the horizontal axis. 6. Answer the following questions relating to diversification. a. What implication does diversification have for investors? b. If an investor decides to hold a 1-stock portfolio and as a result is exposed to more risk than diversified investors, could the non-diversified investor expect to be compensated for all his or her risk? That is, could the investor earn a risk premium large enough to compensate for that part of the total risk that diversification could have eliminated?