Diversification (7 points). Marco Wiz has 40% of his money invested in stock A and the remaining 60% in stock B. Stock A's expected return is 5% with a volatility of 4.1%, stock B's expected return is 2.5% with a volatility of 1.5%. The correlation between the returns of stock A and B is 0.3 . a. Find the expected return, variance and volatility of Marco's portfolio. ( 3 points) b. Quantify the diversification benefit in Marco's portfolio. By how much does diversification reduce the risk of his portfolio? (2 points) c. Explain the concept of diversification between investments in your own words. Under what condition is diversification at work between two different stocks? Is this condition realistic in practice? ( 2 points)