Question: Answer the following two questions Question 1 a. Diversification is a protection against ignorance, according to Buffett. (it) makes very little sense for those who

Answer the following two questions Question 1 a. Diversification is a protection against ignorance, according to Buffett. "(it) makes very little sense for those who know what they're doing." Is Buffett right? Explain the Strategy of Diversification and discuss the power and limit of a diversification strategy. Why do the benefits from diversification depend on the correlation between the returns of the assets in the investor's portfolio? Discuss fully your answers. [25 marks] b. Your friend won the lottery, dropped out of her Finance degree, and asks you for help to invest the lottery money. Explain her the main steps we must follow to build an optimal complete portplio. Is the composition of this portfolio affected by her degree of risk aversion? Explain your answer. [25 marks)

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