Scenario one: In broad terms, why is risk diversifiable? Why are some risks non$-$diversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?

Scenario two: Is it possible that a risky asset could have a beta of zero? Explain. Based on the CAPM, what is the expected return on an asset? Is it possible that a risky asset could have a negative beta? What does the CAPM predict about the expected return on an asset? Give an explanation and example for your answer.

Scenario three: If a portfolio has a positive investment in every asset, can the expected return on a portfolio be greater than that of every asset in the portfolio? Can it be less than that of every asset in the portfolio? If you answer yes to one of both of these questions, explain and give an example for your answer$($s$).$