George works as a financial advisor in Wall Street. He typically invests in a collection of 50 equities drawn from several deferent industries. During a meeting with his clients, one client told him the following: "I trust your stock-picking ability and I would like to hear some advice on how I should invest my money in you’ve best ideas. Why invest in 50 companies when you obviously have strong opinions on a few of them?". George plans to respond to his client within the context of modern portfolio theory.
A. Contrast the concepts of systematic risk and rm-specic risk, and give an example of each type of risk
B. Critique the client's suggestion. Discuss how both systematic and rm-specic risk change as the number of securities in a portfolio increases.