An investor buys 1 share of Zephyr Ltd at the price of $34.5 on July 1, 2021. The firm is not expected to pay any dividends. Consider the following three possible scenarios for the share price on July 1, 2022: $58 if the economy is "good", with a probability of 30%. $36 if the economy is "moderate", with a probability of 55%. $22.5 if the economy is "bad", with a probability of 15%.

a) Calculate the expected return for holding the share for a year. (2 marks)

b) Calculate the variance of return and standard deviation of return. (2 marks)

c) Explain the concept and benefits of portfolio diversification. Is it possible to diversify away all risk in a portfolio? Explain your answer. (2 marks)

d) Suppose that shares in a different company Eagle Inc. can be bought on the market, with returns as follows 1% if the economy is "good", 4% if the economy is "moderate", and 5% if the economy is "bad". Explain how you could use Eagle Inc. shares in conjunction with shares in Zephyr Ltd to create a diversified portfolio.