The Variance of a Portfolio Containing N Assets with Independent

question 62

Multiple Choice

The variance of a portfolio containing n assets with independent returns:

• A) increases as n increases.
• B) decreases as n increases.
• C) is constant for any n greater than two.
• D) does not change in a predictable way when n increases.

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Definitions:

Functional Currency

Functional currency is the main currency used by a business or economic entity in its primary economic environment for accounting purposes.

Straight-Line Method

A method of accounting for depreciation by equally spreading the cost of an asset over its useful life.

Currency Exchange Rates

Currency exchange rates are the rates at which one currency can be exchanged for another, influencing international trade and investments by affecting the price of goods and services.

Net Monetary Assets

Financial assets that are in cash or can be quickly converted to cash, minus liabilities that are due in the short term.