As Diversification Increases, the Unique Risk of a Portfolio Approaches

question 45

Multiple Choice

As diversification increases, the unique risk of a portfolio approaches

• A) 1.
• B) 0.
• C) infinity.
• D) (n −1) × n.

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Definitions:

Debtor

An individual or organization that owes money to another party, known as the creditor.

Security Agreement

A legal document that provides a lender a security interest in a specified asset or property that is pledged as collateral for a loan, in case of borrower default.

Authenticated Record

A document verified as genuine, usually through a process that confirms its origin and integrity.

Collateral

Collateral refers to assets that a borrower offers to a lender as security for a loan, which can be seized if the loan is not repaid according to the terms of the loan agreement.