4. (8 marks) Explain why portfolio risk (Op) tends to decrease as the number of stocks in the portfolio increases. Key concepts to include in your answer: diversification, covariance of returns and specific risk. (Note: The is question is worth 8 marks, so I expect to see an 8 marks answer.) 5. (8 points) Bilibaba Inc.'s most recent dividend paid was $2.40 per share. The dividend is expected to grow at a rate of 6 percent per year in the foreseeable future. The risk- free rate is 5 percent and the return on the market is 9 percent. If the company's beta is 1.3 what is the price of the stock today? 6. (10 points) Consider the following 4-stock portfolio: Stock A B Investment $100,000 $150,000 $250,000 $500,000 Beta 1.50 -0.25 1.25 0.75 C D The market required rate of return is 12 percent and the risk-free rate is 4 percent. a. Find the required rate of return of the portfolio. (4 marks) b. Find Bp, the beta of this portfolio. (3 marks) c. Use the portfolio B your obtained in part b. and the SML to verify that the required rate of return of the portfolio is the same as that in part a