Suppose there are two options to invest in stocks:

Option 1: Invest in one single stock

Option 2: Invest in a portfolio consisting of different stocks

What kinds of risk you face for option 1 and options 2? Compare the risks of the two options.

2. You are interested in investing in a portfolio including stocks A, B, C and D. You have talked to three different financial strategists: Dan, Paul and Mary. Assuming that the risk-free rate is 4% and the expected return on the market is 12%. Who should you take their advice? (choose one person).

Stock	Beta	Dans Investment	Paul's Investment	Mary's Investment
A	1.3	2500	5000	10,000
B	1.0	2500	5000	10,000
C	0.8	2500	5000	-5000
D	-0.5	2500	-5000	-5000