Question seven A. You are an investment advisor. During a consultation a client says to you "I want to diversify my portfolio. I currently hold investments in two companies, but I've read that if I add more assets to my portfolio I can eliminate risk completely." Using a diagram, advise the investor as to whether his assumption is correct. (6 marks) Consider the following information: State of Economy Probability B. GKC Boom Good Poor of State of JMB Economy 0.4 .1 0.2 .07 0.4 .04 0.35 0.10 -0.05 i. (4 marks) ii. Compute the expected return of each stock Compute the standard deviation of each stock Which stock is most volatile? (4 marks)