Question: a) Explain the rationale for diversification when only 2 risky financial assets are available. b) Consider a risky portfolio which consists of a number n

a) Explain the rationale for diversification when only 2 risky financial assets are available. b) Consider a risky portfolio which consists of a number n of stocks. By making use of the Single Index Model. Show the impact of diversification on the non-systematic risk when the pair wise linear correlations among the idiosyncratic terms are equal to. 1 0 a) Explain the rationale for diversification when only 2 risky financial assets are available. b) Consider a risky portfolio which consists of a number n of stocks. By making use of the Single Index Model. Show the impact of diversification on the non-systematic risk when the pair wise linear correlations among the idiosyncratic terms are equal to. 1 0

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