Which of the Following Is True Concerning Diversification? Assume That

question 5

Multiple Choice

Which of the following is true concerning diversification? Assume that the securities being considered for selection into a portfolio are not perfectly correlated.

• A) The risk of the portfolio is certain to be increased as securities are added.
• B) As more securities are added to the portfolio, the market risk of the portfolio declines.
• C) After about 10 securities are added to the portfolio, additional securities have essentially no impact on reducing risk.
• D) As more and more securities are added to the portfolio, the level of risk approaches the level of systematic risk in the market.
• E) If you hold more than 100 securities, then the portfolio is risk-free.

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