Which of the Following Is True Concerning Diversification? Assume That

question 299

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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Definitions:

Tribal Leaders

Individuals recognized for their authority, leadership, and influence within tribal societies, often responsible for decision-making and guidance.

Enforce Authority

The act of implementing or ensuring compliance with laws, rules, or decisions by those in power.

Legal Sanctions

Penalties or coercive measures that are imposed by law to enforce compliance with legal norms and regulations.

Kin-Ordered Society

A society organized around family relationships, where social roles and status are determined largely by kinship ties rather than individual achievement.