Question: 1.Why does the average 2-stock portfolio give you the same expected return as the average 1-stock portfolio? 2.Why does the average 2-stock portfolio give you

1.Why does the average 2-stock portfolio give you the same expected return as the average 1-stock portfolio?

2.Why does the average 2-stock portfolio give you lower risk than the average 1-stock portfolio? (don't use coin flip example in your answer)

3.Use the coin flip example to show why diversification lowers risk without sacrificing expected return.

4.Why are there diminishing returns to diversification? That is, as you add more stocks, the marginal benefits go down. Why?

5.How did we calculate beta of McDonald's? Explain in detail.

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