Write an assessment to address the following problems/questions:

1. Assess how diversification benefits the investor. Can you imagine circumstances where an investor would not want to diversify? Discuss why or why not.

2. Analyze the formulation of the Capital Asset Pricing Model including the definition of the model with identification of each component. Explain how the CAPM development effectively makes use of the diversification as a foundation for the development of the model. Discuss the uses of the Capital Asset Pricing Model within finance.

3. Develop the Capital Asset Pricing Model using the assumptions that the risk free rate is 4%, the expected return on the market is 10% and the relevant beta is 1.25.