You want to construct a portfolio of stocks each of which will carry only company-specific risks. Each stock will have the same expected return and volatility of return. How many stocks will you include in your portfolio for its average return to have a volatility of only 2% of the volatility of each stocks return?

1. 2,500

2. 8,100

3. 10,000

4. 250,000

5. None of the above