When Many Assets Are Included in a Portfolio or Index

question 16

Multiple Choice

When many assets are included in a portfolio or index the risk of the portfolio or index will be:

• A) less than the risk of the securities because the correlations are greater than 1.
• B) equal to the risk of the securities because the correlations are equal to 1.
• C) less than the risk of the securities because the correlations are usually less than 1.
• D) unaffected by the risk of securities because their correlations are less than 1.

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