Could you answer the following question please?

5. a. [8 points} Briey explain how diversication reduces risk. I]. [3 points} Briey explain the effect of introducing borrowing and lending at the risk-free rate on the efficient portfolios. c, (3 points] Assume the following data for a stock: Beta = cs; risk-free rate = 4 percent; market rate of return = 14 percent; and expected rate of return on the stock = 13 percent, Is the stock underpriced, overpriced, or prioed oorreoy? Explain. d. [9 points] Company A's historical returns for the past three years are 6 percent, 15 percent, and 15 percent. Similarly, the market portfolio's retums were 10 percent, 10 percent, and 16 percent. Suppose the risk-free rate of return is 4 percent and that investors expect the market to return 10 percent, What is the cost of equity capital (required rate of retum of company A's common stock), computed with the CAPM