Please Answer with details and explanation so as to really understand

Part A Suppose you work for AA Pensions Trust, a private pensions organisation registered under the National Pensions Regulatory Authority, Ghana. You are preparing to meet a group of individuals who are interested in investing in your personal pension products. As part of the agenda for the meeting, your potential clients have asked for some education on the issues listed below. Write a report that briefly addresses each of the issues below: i. What is the primary goal of portfolio diversification? Briefly discuss the determinants of portfolio risk. ii. As illustrated below, Elton and Gruber (1977) shows that about 80% of the diversifiable risk in a single stock can be eliminated with about 10 securities in the portfolio. 49.2 Diversifiable risk Nondiversifiable risk 10 20 30 40 1,000 Number of stocks in portfolio a. Distinguish between diversifiable and non-diversifiable risk of a security b. Given the findings of Elton and Gruber, as illustrated above, would you expect individual investors and institutional investors - mutual funds, Average annual standard deviation (%) 23.9- 19.2 mimmits pension funds, etc. - to hold similar number of securities to achieve optimal diversification? If yes, why? If no, why not? Please clearly justify your answer. What advice would you give to a client who is confused about the concept that in a well-functioning market all assets will have the same reward to risk. ratio? Your answer should cover the following issues: a. How would we expect that all assets have the same reward to risk ratio? b. How can an investor increase his/her returns if this holds true? (70 marks)