Question: a) Explain the relationship between risk and return? b) Why is diversification necessary and what is the concept of diversification? c) Explain each investment instrument

a) Explain the relationship between risk and return? b) Why is diversification necessary and what is the concept of diversification? c) Explain each investment instrument in the picture above, from low risk to high risk? d) Explain the advantages of each of these investment instruments

Expected Return Low Risk Average Risk High Risk Security Market Line (SML) The slope indicates the required return per unit of risk NRFR Risk (business risk, etc., or systematic risk-beta)

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