The Addition of a Risky Security to a Fully Diversified

question 79

Multiple Choice

The addition of a risky security to a fully diversified portfolio:

• A)must decrease the portfolio's expected return.
• B)must increase the portfolio beta.
• C)may or may not affect the portfolio beta.
• D)will increase the unsystematic risk of the portfolio.
• E)will have no effect on the portfolio beta or its expected return.

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