As the Number of Securities in a Portfolio Is Increased

question 6

Multiple Choice

As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation?

• A) It increases at an increasing rate.
• B) It increases at a decreasing rate.
• C) It decreases at an increasing rate.
• D) It decreases at a decreasing rate.
• E) It first decreases, then starts to increase as more securities are added.

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Definitions:

Algorithms

Step-by-step procedures or formulas for solving problems or completing tasks, often used in computer programming and mathematics.

Representativeness Heuristic

A cognitive shortcut where the likelihood of an object belonging to a category is judged based on how representative it is of that category.

Belief Perseverance

Belief perseverance is the psychological phenomenon where individuals maintain a belief despite new information or evidence that contradicts or disproves it.

Algorithms

A set of rules or a process followed in calculations or problem-solving, especially by a computer.