Question: (a) Define diversification and explain its effects on systematic and unsystematic risk. (4 marks) (b) Differentiate between perfect negative correlation and perfect positive relation. (6

(a) Define diversification and explain its effects on systematic and unsystematic risk. (4 marks) (b) Differentiate between perfect negative correlation and perfect positive relation. (6 marks) (c) Hairul is considering to buy the ordinary shares of One Berhad and Two Berhad. The possible returns for the companies' shares next year are as follows: i. Calculate the expected return of the shares. (5 marks) ii. Calculate the variance for each share marks) (4 iii. Calculate the standard deviation of each share. (4 marks)

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