a. If there is investment in two securities and the total risk of the portfolio is less than total risk of the either security what has caused this to happen? Explain with formula.

b. Capricorn Ltd has an expected return of 10% pa and a beta of 1.2. If the risk free rate is 4%, calculate the expected returns and beta of the following portfolios: i. 25% funds in Capricorn and 75% funds in risk free ii. 50% funds in Capricorn and 50% funds in risk free