Topic: Financial Management 2 please show all workings

Question #1 (a) Outline what is meant by diversification and explain how it affects the risk and return on a portfolio. (5 marks) (b) Distinguish between systematic and unsystematic risk. (4 marks) (c) Outline six (6) of the basic assumptions of Capital Asset Pricing Model (CAPM). (6 marks) (d) Describe the relationship between CAPM and the Security Market Line (SML). (8 marks) Question #2 (a) () The expected return on a treasury security of Mayberry is 6% and the expected return on the market portfolio is 11% and the Beta for the company is 1.3. What should be the expected return for Mayberry's stock? (3 marks) (i) If we were interested in a defensive stock whose beta coefficient is only 0.7, what would be its expected return? (2 marks) (b) The following table represents information about three stocks